Like fine wine, credit scores (with these tips) will get better over time.
Major increases to credit scores do not happen overnight, but with some focus and commitment you can drastically improve your credit score and raise it from the proverbial dumps.
Check your Credit Report
Reduce Credit Card Debt
Setup Payment Reminders
Avoid Big Credit Score Mistakes
Check your Credit Report and Look for Errors
Repairing your credit score starts with a relatively simple task of checking your credit score. Once you check your credit score you will know what you are working with and can make some decisions on how to best approach improving your credit situation.
While reviewing your credit score you will want to make sure it accurately reflects your credit history.
Federal Trade Commission study finds that 5% of consumers had errors on their credit reports which negatively impacted their credit score.
Common errors you want to look out for:
- Collection accounts that are still on credit report past the statute of limitations in your state
- Your credit information mixed up with someone who has a similar name
- Identity theft involving someone opening new credit accounts under your name
- Loan defaults showing up multiple times due to debt being sold to other debt collectors
- Joint account from past relationship going unpaid
If you notice an error you can dispute them with an online form on the three major credit agencies websites: Equifax, Experian, and Transunion. The credit agencies have 30 business days to respond to your online dispute.
Reduce Credit Card Debt and Increase your Credit Score
The amount owed, versus the total available credit is considered the credit utilization ratio.
Credit Utilization ratio example:
Credit Limit = $5,000
Debt Owed = $4,000
Credit Utilization = ($4,000 / $5,000) = 80%
The credit utilization score accounts for 35 percent of your credit score. Reducing your debt balances and maintaining a lower credit utilization ratio will help to improve your credit score. Ideally you should try and keep your credit utilization below 30%. Keeping your credit utilization below 30% shows lenders that you are capable of handling open credit limits responsibly.
Setup Payment Reminders
Payment history has a very high impact on your credit score so this is an area you want to focus on when trying to improve your credit rating. Life is busy, remembering to pay each of your bills every month can become a challenging task.
Our recommendation would be to set up as many payment reminders as possible. This way you will be alerted to upcoming payment dates so that you can plan accordingly. This is highly recommended at the very beginning of your decision to improve your credit.
An even better step to take is to enroll in automatic payments. Most credit cards, car loans, and mortgages offer this great feature. This way you can ensure payments are scheduled and you can focus on other areas of improving your credit rating.
Avoid These Massive Credit Score Mistakes
On your road to repairing your credit, please steer clear of these credit score mistakes:
- Late Payments
- Skipping Payments
- Closing zero-balance and/or older credit cards
- Applying for too much credit
Relax and let time work it’s magic
One of the most important steps in improving your low credit score is recognizing that you must take action to effectively improve your score. Check your credit score and look for errors, reduce your overall debt, set up automatic payments and you will be well on your way in improving your credit score.
The final step is to relax and understand that your credit rating will not increase overnight. Credit agencies report monthly to the credit bureaus so realistically it will take several months to start seeing large increases to your credit score.
The good news is that if you have a lower score and you follow our recommended tips, you are in a position to see a 100-200 point credit score jump. With a lower credit score there is much more upside to be seen, compared to someone who already has a high score. Keep focused on the little steps to improve your credit rating and you will see big results!
What steps have you already taken to improve your credit score? Comment below! 🙂