These days, our credit scores are the most important 3 digit numbers we’ll ever come across. They help us to make large purchases, start businesses; in some cases, our credit scores help us get the job of our dreams. Unfortunately, they can work the other way as well. Poor credit scores can stop you from getting that car or that house; even stop you from landing that awesome job. So, if you currently have less than perfect scores, chances are, you want to increase them. The only problem is that most people simply don’t know where to start. Here are a few pointers for you…
Step #1: Take A Look At Your Credit Report – If you’ve got a leaky roof, you can’t just tell a roofer that you’ve got a leak and expect a quote. Before they give you a quote, they’re going to need to take a detailed look at the damage. You should take the same stance when improving your credit. Start by getting a copy of your credit report to see exactly what’s going on. Some people may be a bit concerned about pulling their credit report because it “could cause damage” to their credit. To be honest, that’s an old wives tale. When it comes to your credit report, you can pull a copy every day if you’d like without causing damage. However, the concern does come from some truth. When applying for loans, lenders will submit a hard inquiry to the credit reporting agencies. Too many of these can definitely cause a bit of damage.
Step #2: Make A Few Lists – Now, it’s time to make a couple of lists….
- Inaccuracies – Unfortunately, not all credit reports are perfect. There are quite a few inaccuracies in the system. These inaccuracies can cause your great score to be not so great! So, take a close look at all accounts, your address, and all other information to find anything that may be inaccurate. If you find something, add it to your inaccuracies list.
- Past Due Debts – Now, make a list of everything you owe that’s past due. When making this list, make sure to include the account numbers, amounts owed, and contact information for each of the debts. It’s important to remember that all past due debts matter, even if they’re only a few weeks behind.
Step #3: File Disputes – If your credit score does have inaccuracies, it’s your right as a consumer to dispute them. Each one of the 3 major credit reporting agencies has a slightly different dispute process. So, it will be best for you to go to their websites to read their dispute terms. Here’s where you can find them…
Step #4: Start Working On Past Due Debts – When adding new, positive loans to your credit report in an attempt to improve your score, old, past due debts can cause your growth to happen slowly. So, it’s best to start by paying these off. Now, use your list from earlier to start calling the lenders and creating payment arrangements. In some cases this may be a payment plan. As long as you start to pay them back, you’re on track!
Step #5: Add Positive Accounts To Your Report – Now it’s time to show credit reporting agencies that you are capable of handling a loan properly. To do so, you’ll have to get a loan; a bit of a catch 22 I might add. For those with poor credit looking to improve, I often suggest using secured credit cards. These are credit cards that just about anyone can qualify for because the risk in lending is alleviated through a security deposit. Nonetheless, using a secured credit card properly can do great things for your credit score. When using your new secured credit card, follow these simple tips to make sure that it shows up on your report as a positive account…
- Control Your Spending – One thing that plays a pretty big role in your score is your debt to credit ratio. As consumers start spending more than 50% of their outstanding credit limits, they’re showing the early signs of financial hardship. As a result, their credit score adjusts to their financial capabilities. So, you never want to owe more than half of the total amount of money available to you. Another thing to keep in mind is that it’s best to pay credit cards off within the grace period. This will help you avoid interest. So, never make a purchase you can’t afford to pay off within a couple of weeks.
- AggressivePayments – It’s best to pay your credit card off completely each month. However, if you can’t do so, you’re going to want to send more than the minimum payment. Not only will this help you to avoid interest in the long run, it will also look outstanding on your credit report.
- Pay Early – Late payments look horrible on credit reports. To avoid paying late, stop waiting for due dates. It’s best practice to make your credit card payments at least 2 weeks in advance. Then, no matter how long it may take for your lender to process your payments, they all show on your report as paid on time!
Don’t let a lower credit score get you down. We were all young once and we’ve all made foolish financial decisions. The sooner you take control of your finances, the sooner your credit score will improve.
There are several sites that let you access your credit score. We have found this free option to be relatively hassle free. Click Here for Free Credit Report Resource
By Joshua Rodriguez, Staff Writer