Credit Improvement Guide

Do you need to read our Credit Improvement Guide? Ask yourself this, how often do you worry about where the money for a bill, project, or emergency will come from? Unfortunately, if you’re like most Americans, it’s probably more often than you’d like.

According to a Statista report, 34% of Americans have less than $1,000 in savings. This shows that many people do not have the financial capacity to address an emergency or undertake major life improvement projects.

But does this mean that you’re doomed to remain in such a position if you do not have a well-paying job? Fortunately, no. Whether you want to pay for college tuition, emergency renovation, or medical procedure, financial institutions offer credit.

While it offers a lifeline for many people, not all qualify. This is because of poor credit scores. If you fall into this category, don’t worry. This article outlines simple steps that you can take to improve your credit score.

1. Build Your Credit File

Before you can improve your credit score, you’ll first need a credit footprint. If you’ve never taken credit or you’re young, begin by opening new accounts. Ensure that you open accounts that will be reported to the major credit bureaus.

With such accounts in your name, you can begin establishing a good track record as a borrower. With time, this will reflect on your credit score. Another option that can help you is being added as an authorized user on another person’s credit card. However, you should only do so if it’s a person who uses the card responsibly.

2. Don't Miss Payments

In essence, your credit score is a reflection of your trustworthiness with credit. Beyond your ability to repay, it also shows your commitment to honoring such obligations. As such, your payment history is one of the most important factors.

In fact, there’s no better way to ruin your credit score than making late payments. This is because they can stay on your credit report for seven and a half years. So, in case you miss a payment by 30 or more days, reach out to your creditor. Ask them to consider stopping reporting the missed payment. Even if they do not agree, keeping in touch with them is always a good idea.

When it comes to making payments on time, it’s not just about credit. It also applies to other bills such as water and electricity.

3. Be Strategic with Credit Card Payments

While paying your credit card bills on time is great, it’s not enough to earn you a great rating. One thing that you should avoid is maxing out on the available credit. This increases your utilization rate, suggesting that you are under financial strain.

In this regard, you should try keeping your utilization rate as low as possible. Ideally, it should be 30% or lower. To help with this, you should find out when your card issuer submits their reports to credit bureaus. With this information, you can reduce the balance right before the reporting date to improve your rating.

4. Raise Your Credit Limits

As you now know, having a low credit utilization rate will aid your efforts. But, reducing the credit you carry immediately may not be possible. Fortunately, there’s another way to do it.

After developing a good payment history, creditors will be willing to extend more credit to you. As such, you should request a higher credit limit. However, you should know that this will only deliver the desired results if you do not use the newly available limit.

Also, if you’re not good at controlling your spending, you’ll be better off without a higher limit.

Credit Score Graphic - Credit Improvement Guide

5. Dispute Errors on Your Credit Report

The mistakes you make, such as not paying bills on time, can significantly pull down your credit score. So, the last thing you want is something you’re not responsible for also weighing it down. Unfortunately, as bizarre as it sounds, errors on credit reports are common.

Therefore, you should request a credit report from all the major bureaus and confirm that it’s accurate. Otherwise, you may work hard to improve your score and not see any meaningful results. Should you identify any errors, dispute them. While it may take some time before they’re resolved, the wait will be worth it.

6. Use a Secured Credit Card

In your efforts to build or rebuild your credit score, secured credit cards are a powerful tool. Unlike unsecured ones, you’ll back your credit limit with an equivalent cash deposit. As you make timely payments, your credit on time, your score will increase.

This option is highly impactful and is great for diluting past mistakes affecting your score. With a good payment record, you’ll notice improvements within several months. For maximum impact, choose a card from a provider that reports to the three main credit bureaus.

The Two Rules of Improving Your Credit Score

Improving your credit score is a process that involves commitment and deliberate actions. To succeed, you need to do; pay bills on time and keep credit balances low.

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