How To Improve a Credit Score

You see them at parties or family events, they appear at the worst times and make you feel just plain awkward. They're those acquaintances that you'd honestly rather not have to spend time with - they're lingerers, and you can't seem to shake them even after the conversation has ended. Thankfully, when the night is over, you get to go home. Unlike irritating social pariahs, you can never escape your lingering credit history. It follows you around from place to place, constantly sticking to you over time. If you're not careful, poor credit will take over your financial life. Unless you take constructive action, you will not shake your pestering credit history. Luckily, there's an answer, and it really works! Use this guide as your ticket to getting out of those uncomfortable credit situations. When your problems follow you home each night, you need a serious solution! Here's 5 great ways to improve your credit score.

Review: Find Crediting Mistakes

Tip Number 1: It's important to understand what's already happened in your financial history before you begin improving your credit. The first thing you should do is take stock of what's gone on and break down just how and why your credit has been affected. This will prove an effective way to learn from your past. It can also be a cathartic experience. Learn from old habits and mistakes. Review your situation. Too often we forget to stop and take a breath before trying to fix a situation. Use this opportunity as you begin to rectify your credit score.

Looking back at your history also means making the time to double-check late payments, edit outdated or incorrect information, and discover any potential inaccuracies. These can greatly improve your score right off the bat! You can dispute errors with credit bureaus online and have them corrected or even removed from your credit reports altogether.

Mixed Solutions for Debt and Credit Problems

Something to consider: Remember that there is likely no one, single, definitive way to fix your credit situation. Now, that's not to suggest that yours is a lost case. It's actually the complete opposite. There's so much you can do to fix the pickle you're in. However, it's important to appreciate that these tactics effect different situations differently, because after all, we're all in unique financial predicaments. Therefore, using every single tactic will be essential to improving your credit score overall.

All is not lost! You can absolutely turn those finances around if you are aware of what problems you're facing and how to tackle them. These tips can improve your situation, and employing them all together will make a genuine, positive difference. So get started now!

The DOs and DON'Ts

Tip Number 2: As you begin, be sure you know what to do and what not to do. There's several decisions people tend to make when they want to try and boost their credit, and some of those decisions actually make things worse. Avoiding these commonly-made mistakes is essential to improving your credit. In the same light, some things that should be done, are ignored or passed over. Making the right choices about pressing issues early on is key!

DON'T cancel your card! Doing so could hurt your credit. Leave cards open and use them to pay off bills and other recurring charges. Consistently paying off smaller bills is a much more effective tactic than closing out the card completely. Part of the equation making up your credit score involves your history. This is directly affected by your total available credit over a number of years, so you'll want to keep that information available. The more, or rather lengthier, positive credit history you can maintain, the better.

DO be sure to get some help! There are credit and financial counselling services, and even accounting experts who will offer you help and advise. If you're in a tough situation, and you need assistance, seek proper help. This cannot be stressed enough. Financial woes are a deeply troublesome issue for millions of Americans. There are ways to seek quality aid, and outlets for the technical and emotional difficulties tied into credit troubles.

Be careful to remember these common missteps, and avoid making them yourself!

How is My Credit Score Calculated?

Something else to consider: Here's the official breakdown of your credit score, according to FICO. Check out how the score is made up:

  • 10% = Types of Credit
  • 10% = New Credit
  • 15% = Length of Credit History
  • 30% = Amounts Owed
  • 35% = Payment History

When you talk about turning around your credit score, the first thing you usually hear is 'Take out a card and spend.' While this isn't bad advice, (building up new credit will help your overall score if you make timely payments) you should note that it still only makes up part of the puzzle. A smaller part too. There's more that needs to be done to make a meaningful impact.

Remember, you can Negotiate with Creditors

Tip Number 3: There's one extremely effective tactic that is often overlooked - negotiating. It's no secret that creditors want you to make payments and use your credit card. They want you to spend and pay on time. They want you to have a solid score and a good experience. In fact, it hurts them too when your credit is negatively impacted. Don't think of creditors as out to get you, because they aren't. Often-times, when you communicate with creditors, you can negotiate your way to a better financial situation.

Doing so on-time is essential. Don't put it off. Get in touch with your creditors and try to see what you can do to improve things by working with them. Creditors have the power to:

  • Lower interest rates and monthly minimums
  • Wave late fees or penalty charges
  • Lengthen duration of loans
  • Bypass a monthly payment
  • Close accounts temporarily
  • Accept settlement offers on debts

Reach out to creditors early on and you may be able to negotiate yourself towards better credit.

What You Do Matters

Something more to consider: The three major credit reporting agencies are TransUnion, Experian, and Equifax. Every time someone applies for a new loan or credit card, these agencies may be contacted with a credit inquiry. These inquires actually affect your credit score, so be sure to use care when you apply for new loans or cards. Check first to see how each action may affect you, because several inquiries in a short time will severely lower your credit score.

Start Rebuilding Credit

Tip Number 4: You'll hear it over and over, and it's 100% correct - rebuild your credit to improve your score. Sure it takes time and money to accomplish, but consistent, on-time payments create a healthy credit history. If you don't have a credit card, get one. Be sure to use your new credit for paying off smaller amounts, steadily, over a lengthy time-period. A good place to start is a utility bill. Every month, pay on time and don't exceed your limits. Be diligent and you'll significantly boost your credit score.

What's the Deal with Bankruptcy?

One more something to consider: It's a question that comes up often for those of us with credit debt. So what's the story here? Does bankruptcy solve problems or create them? This is definitely something to think about and for the most part, avoid if you can help it. While filing may be the best overall decision for your financial situation, it's pretty devastating for your credit. Bankruptcy will cause a dramatic drop in your credit score, and the effects can last for years. So if you're considering bankruptcy, speak with a financial advisor to see how it will impact your life. Don't make any rash decisions under the assumption that one solution can solve all your problems.

Divide to Conquer

Tip Number 5: Finally, tackle that debt as strategically as possible! It may seem like a great decision to consolidate your balances from multiple credit cards onto one, but in most cases you should steer clear of this gamble. You might be after lower interest rates, but maxing out your card will harm your credit score. Depending on your situation, you may want to consider a refinancing and cashing-out tactic, taking out a debt consolidation loan (to pay off a higher-interest balance), or spreading out debt over multiple low-interest rate credit cards. Remember that positive credit history improves your score. So another interesting idea is that a loan (over the course of several years) paid of properly and on-time will further add to your credit history and therefore your credit score. Loans should only be considered if you are certain you can afford the investment and make timely payments.

Saving Safely

Improving your credit score can be simple. A little bit of advice and thoughtful decision-making can show that it really works! Remember to be careful in the risks you take to improve your credit score. Mistakes can make often things worse. However, efficient and well-thought-out decisions can really turn things around. Implement these tips and tricks into your financial life, and seek help where you need it. Get your credit score to quit pestering you now.

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