Your Credit Score and How To Improve It
What if when you go to buy a new car, you are denied an auto loan because of your bad credit score? We all know the importance of having a good credit score can be to making financial purchases like financing a car or a house. When you have a low credit score making these purchases can be that much more difficult.
Check your credit report for factors that could be affecting your score negatively.
One of the first things you can do when you find out that you have a poor credit score is to see what is affecting your score negatively. You can do this by asking for a copy of your credit report from one the three credit reporting bureaus, Equifax, Experian, and TransUnion. There are a number of free credit reporting services available online and over the phone, like Annualcreditreport.com.
Once you have received your credit report, review the details of the report. Many factors can affect your ability to improve on your rating. Making late payments or missing payments can affect your score negatively. Having a high balance that is close to your credit limit could also be impacting your score significantly. Having multiple credit accounts can also be bringing down your credit score.
As you review your credit report, you will start to take notice of the things that are making your credit score poor, which will then allow you to repair it.
Check your credit for errors.
Nothing is perfect and neither is your credit. Sometimes, a mistake or error in your credit report could be the cause of your low credit rating. Checking your credit on a consistent and regular basis is the best way to catch an error.
An error in your credit record could cause you to get denied on loans, get higher interest rates or miss out on lines of credit. An error can be a mistake of your accounts, an erroneous amount or an account with an inaccurate status. A mistake in your credit records should be reported immediately so that you can lessen its impact to your credit score.
If you do encounter a discrepancy, you can file a dispute and get the error corrected. Once the mistake is corrected you could see a significant increase in your score and financial standing.
Learn how to improve your credit score.
Another option is to learn ways in which you can improve your credit score. There are a number of strategies you can undertake for increasing your credit rating. Completely paying off any outstanding debts is one option. As you start getting out of debt, your credit score will start to improve.
The most important thing is that you make a plan for repairing your credit score so that you don’t fall into a bad credit situation again.
You can also seek out professional help to improving your credit score. An expert will be able to give you resources and tools to turning your poor credit rating into a great score. You will also get more information on how a credit score works and how to better manage it once you do improve your score.
Tips for Improving Your Credit Score
Once you learn the reasons behind your low credit score you can start taking the necessary steps to make improvements. Improving your credit rating is a process so it’s best to start now.
The following tips will help you through the process of improving your credit score and will eventually be crucial to maintaining a high credit score.
Monitor your credit report monthly.
Many people have a poor credit rating due to unusual activity on their credit, like identity theft. Identity theft is when someone uses your identity to open a line of credit but leaves you to pay back the debt. When this debt is unpaid it can significantly bring down your credit rating. In order to prevent identity theft or any other unusual activity on your credit, it’s good to monitor your score on a monthly basis. You will notice minor changes more easily and will be able to report discrepancies before they affect your score negatively.
Start paying off your debts one at a time.
Another option for improving your credit score is paying off your debts. When debt is left unpaid on your credit report, it can be a big factor in bringing down your score. You will need to start to completely pay off any outstanding debts so that your score can increase. Starting with the lowest debt will make paying off each balance easier to manage.
When you use your credit card, pay off the complete balance before falling into default.
Using your credit cards is a good thing because it builds your credit. However, when you fail to pay off your credit cards that is when things can go bad. Use your credit card on purchases that you can afford to pay off in full at the end of the month. Delinquent credit card balances are automatically reported to the credit bureaus and will count negatively against your credit score.
Lower your credit utilization by lowering your credit card balances.
Your credit card balance on a card should only be a third of your credit limit. For instance, if you have a credit limit of $6,000, you should only maintain a $2,000 balance. Anything higher, is going to be difficult for you to pay off without accruing a significant amount of interest. The best thing to do is to pay off your debt in full as often as possible as soon as possible, especially for credit card balances.
Negotiate with your creditors.
One very powerful option for improving your credit is to start talking to your creditors, specifically before your debts go to collections. If you have a valid reason for missing or skipping payments, your creditors might be more likely to give you a break and not make negative reports to the credit bureaus.