A healthy credit score can transform your life in a way. Having good credit opens doors for you financially.
Excessive spending, impulse buying and bad decisions are a few choices that tend to have a negative impact on your credit report. Sudden unemployment, medical emergencies and other surprises can lead to a poor credit score, as well. Whether your low score resulted from too many trips to the mall, all those great weekends at the lake, or other unforeseen circumstances beyond your control, do not despair; all hope is not lost. There are effective steps you can take to increase your credit score.
Turning a bad credit report into a good one is not something that can be done overnight. After all, it probably took a little time to earn your current unsatisfactory credit rating. Cleaning up a messy credit report is about as much fun as cleaning gum off your shoe. However, in both cases, the reward is definitely worth the effort.
The following step by step process is the best way to increase your credit score and build a strong foundation for a successful financial future. Although it may take a little time, continued commitment and diligent effort will produce worthwhile results. In fact, completing this process would be beneficial for anyone, unless you already have an impressive score. People that have a score of 785 or above have numerous financial advantages, which affect nearly every aspect of life, over those with lower scores.
Review your Free Credit Report
Everyone can obtain a free credit report annually. If you do not have a recent copy, get one that includes the data from all three major credit bureaus. Experian, TransUnion and Equifax will provide consumers with one free credit report per year. There are several reputable websites that will provide the reports or you can contact the credit bureaus directly.
Carefully review the reports for outdated information and errors. Note any disputed claims and reported late payments. Contact the creditors and credit bureaus to have any invalid debt claims or outdated data corrected or removed. Items over seven years old should be considered out of date. Every disputed claim must be resolved; settle it or drop it. Make manageable arrangements with creditors to pay valid overdue debts. If you have had a fairly good track record, except for one or two late payments, nicely ask the creditor to remove the negative notations from your report.
Get a Budget
Next, assess your current finances. Mortgages, loans, credit cards, everyday expenses and bills, and new payment arrangements for overdue debts must be calculated. Using your average anticipated income, create a workable budget. It may be necessary to contact lenders and creditors to ask for assistance. Some lenders and creditors are quite flexible and supportive, offering customers various helpful options. If you are eligible, you may want to take out a small personal loan to pay off your most detrimental debts.
New Credit and Utilization
Obtaining a new credit card, if possible, can be helpful. A new card with a $1000.00 limit and a zero balance can positively affect your debt to credit ratio. A secured card is a great option for many consumers. Use the new card for small purchases and pay off the balance each month.
Credit scores are based largely on the amount of credit utilized compared to the amount of credit available. Lowering your utilized amount of credit to less than thirty percent of the available amount is imperative. Later, you will want to get it even lower. Utilizing ten percent or less of your available credit total is optimal for achieving an exceptional credit score.
Make Payments on Time
From this point on, make payments on time. Work on reducing credit card balances. Whenever possible, send more than the minimum payment. Try to pay off the card with the highest balance first. This will change your debt to credit ratio. Adhering to your budget and making regular, on time, payments will result in positive credit report submissions from lenders and creditors. And, in due time, your credit score will rise higher and higher.