How to Improve Your Credit Score

By Payoff Pilot on in Category Debt
How to Improve Your Credit Score

Repairing the bad credit score can in some ways be compared to losing weight: these is no quick and easy solution to do it right. In truth, out of the many solutions to improve your credit score, a quick-fix method is generally a bad idea. The most practical advice to help rebuild the credit score is to put in place a sensible approach to manage the credit history over time.

Three Must-do Steps to Improve Your Credit Score

The tips listed in this section cover steps to improve credit score.

  1. Get a copy of your credit report – Before being in a position to improve the credit score a must-do step is to request a free copy of your credit report. Your credit report contains a wide range of financial data used in the process of calculating your score. Once this has been received carefully check for errors. Look for incorrectly listed late payments and make sure the outstanding debt amounts are correct. If any inaccuracies are detected make sure to dispute these with the credit bureau as a matter of urgency.

  2. Setup automatic payments – A simple step anyone can take to maintain the positive credit score is to make sure credit payments are made on time. This is one of the leading factors that can help improve the bad credit rating. Many banks send a payment reminder (text message or email) via their online banking systems when a payment is due for payment. Plus, the most convenient method to ensure timely credit payments is to set up an automatic payment through your loan or credit card provider to make sure the payment is debited at the time. If setting up the automatic payments it is important to note this only debits the minimum due on the credit card and this doesn’t give the best money management.

  3. Reduce the outstanding debt – While this might sound like a simple solution, it is generally quite difficult for those already experiencing issues with debt. A first step to reduce the amount owed is to stop using the credit cards. Take the credit report and list of different accounts with outstanding dept or use the monthly statements issued by credit card or loan companies to see the balance and related interest rate. Draw up a repayment plan that makes it possible to put more money towards debts with high interest rates, while making sure to pay back at least the minimal amount of all other accounts.

Four Tips Related to Payment History

The tips listed in this section can have a significant impact on improving the credit score, but if there are payment history issues like late or missed payments, these can be difficult to resolve.

  1. Timely payment of bills – Late or overdue payments (even one or two days) are certain to have a significant negative impact on the credit score.

  2. Recovery after missing payments – For those that have missed payments in the past it is essential to get up to date as soon as possible. Paying the bills on or before the due date after a spell of late payment makes it possible to see an increase in the credit score. Poor credit management in the past soon starts to fade and counts for less going forward. Plus, these issues won’t stay on the credit history forever.

  3. Paying off a collection account – Even if a collection account is paid off in full it will remain on the credit report for a period of up to 7 years.

  4. Get in contact with creditors – If you are starting to have difficulties with meeting your financial obligations, it is certainly worth getting in contact with your creditors as a first course of action. Alternatively, it may benefit to reach out to a professional credit counselor. You are in a better position to manage outstanding debt and increase the credit score after receiving legitimate advice.

Four Tips Related to Existing Amounts Owed

The tips in this section require financial discipline, but can be useful for those seeking help in managing existing amounts owed.

  1. Maintain low balances on credit cards – Leaving one or more credit card with a high outstanding balance can have a negative effect on the credit score.

  2. Clear debt where possible – The best way to improve the credit score is to pay off outstanding debt and not to transfer to another card with a lower interest rate. Also, it benefits to keep the open credit cards to a minimum to help improve the score.

  3. Avoid short-term strategies – It doesn’t help to use short-term strategies to help the credit score such as closing the accounts of unused credit cards.

  4. Don’t apply for new credit cards – Avoid the temptation to apply for new credit cards in the hope of increasing the total available credit. This strategy can backfire and could have a negative effect on the score.

Tip Related to Length of Credit History

  1. Don’t open multiple accounts within a short time-frame – For those that have recently started to manage credit, try to avoid setting up several accounts within a short time-frame. Fast credit account building can have a negative effect on those new to credit, and can also impact the credit score.

Two Tips Related to New Credit

  1. Apply for loans in a focused period – Make sure to comparison shop for credit within a specific time-frame. Credit reports are able to indicate the difference between multiple inquiries for new credit and a single attempt that takes place over the more focused period.

  2. Rebuild credit history – If you’ve had issues in the past and need to rebuild your credit history this is possible by opening a couple of essential accounts and making sure to pay the monthly fees on time, which helps to improve the credit score.

Three Tips for Different Credit Use

  1. Only get credit when needed – Only apply and open new credit card accounts when absolutely necessary. Avoid opening multiple accounts in an attempt to get a more favorable credit mix.

  2. Use credit cards, but be responsible – Someone who is responsible with installment loans and credit cards has the ability to build a good credit score. But, those with no lines of credit can be seen as a higher risk because there is no credit history to refer back on.

  3. Closing an account – Simply closing a credit card account won’t make it instantly disappear from the credit history. Any closed account might still be considered in the calculation of the credit score.

Imagine the feeling of being debt free. Schedule a free review of your finances with a certified credit card debt counselor today.

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