Your credit score plays an integral role in many major decisions that you make as an adult, from paying your way through college to getting a car loan and a mortgage. A good credit score can make life considerably easier, while a bad one can lead to all kinds of stresses and financial strains.
If your score is suffering then it’s time to turn things around. In this guide we’ll look at some ways that you can improve your credit score with minimal effort and expense.
1. Get an Accurate Report
Millions of Americans don’t know what their credit score is. In some cases they just haven’t gotten around to checking, but others are terrified of checking incase they find something they don’t like.
You’re not going to gain anything by ignoring your score but you may gain something by checking. 20% of Americans have reported costly mistakes on their credit reports, ones that have improved their scores when fixed. It’s a common issue, but it’s one that is easy to remedy.
So, get a report from all of the three bureaus and make sure it is accurate. Check personal information, accounts and payments, and if you notice a mistake then you will need to dispute it with the credit bureau.
All the major credit bureaus have their own guidelines on how to dispute your credit report. Just follow the links below to learn these for yourself:
2. Clear Debt
Available credit and accumulated debt accounts for a signifiant percentage of your credit score. Every dollar of debt that you clear gives you more of the former and less of the latter, so focus your attentions on getting those debts paid off.
It sounds like an obvious statement and an oversimplification of the issue, but you’d be surprised at how many debtors don’t follow these basic rules for reducing debt:
- Pay off more than the minimum every month to eat into the principle.
- Make sacrifices. You can enjoy life’s luxurious when you can actually afford them.
- Sell the things you don’t need or use and put the money you make towards your debt.
- Focus on paying off the debts that have the highest interest first.
- Consolidate your debts (but keep number 4 on this in mind).
If none of that is possible, or you’re looking for something more definitive, you may be able to clear your debts with a debt settlement program. A skilled agent will negotiate on your behalf and reduce the size of your debts, after which you can pay them off with one lump-sum amount and then focus your efforts on rebuilding your finances.
3. Pay on Time
Late payments can be a serious blight on your credit report. There is no way to fix the ones that are already late, but you can stop it from happening again and eventually those late payments will disappear.
Setup automatic payments with all lenders to ensure you never miss another payment. Some (such as private student loan lenders) may even provide you with a discount if you sign for automated payments.
4. Use Credit Cards Wisely
Credit cards are a leading contributor to low credit scores, but they can also help to give your score a boost. As mentioned already, a large part of your score is based on how much credit you have and how much of it you use. If you keep the credit cards that you clear instead of closing the accounts, then the disparity between how much credit you have and how much you’re using will be significant.
If most of your debt is tied up in personal loans then you may even want to consider switching to a credit card. Providing you pay off the balance every month then it shouldn’t impact too heavily on your score and over time it will actually improve it.
5. Use a Secured Credit Card
If you don’t trust yourself with an unsecured credit card or you don’t have a score strong enough to get one, then consider a secured credit card. The only credit you have is the amount that you add to the card, so there is no risk of it spiraling out of control. Many secured credit cards also report to the major credit bureaus, helping you to steadily build your score.
There are a few quick fixes, as discussed already, but ultimately the best thing you can do to improve your score is to remain patient. Building credit takes time, and the age of your accounts also reflects positively on your credit score. So, rather than looking for quick fixes, just focus on making small improvements here and there, knowing that in the long run it will benefit your report greatly.
Time is also a great healer for anyone who has serious blemishes on their report, such as bankruptcy.