Improving your credit can seem overwhelming but, there are a few simple steps that you can take to increase your credit scores.
So if you’re ready to change your credit follow this plan.
Check your credit report
The first thing that you want to do is check your credit reports.
Make sure that you get copies of all 3 credit reports from the 3 credit bureaus; Experian, Equifax, and TransUnion because some accounts may only report on one bureau and not the others.
You can get your credit reports for free once a year from all 3 credit bureaus at www.annualcreditreport.com.
Once you have your reports, review them.
Make a list of any inaccurate, incomplete, outdated, or questionable information and file disputes with the 3 credit reporting agencies to correct the errors.
In most cases, removing inaccurate, incomplete, outdated, or questionable information from your credit reports will increase your scores.
Pay down your credit cards
Your credit card utilization accounts for approximately 30% of your overall credit score.
Maxing out your credit cards and carrying very high balances makes you look like you’re living off your credit cards and don’t have enough cash to pay your debt.
Ideally, your credit card utilization rates should be at or below a credit card utilization rate of 20%.
This means that your credit card balance should be 20% of your overall credit limit.
For example, if the credit limit on your credit card is $1,000.00 your balance should not exceed $200.
Lenders consider consumers with high credit card utilization rates as high-risk for default because they may be one financial issue away from not being able to pay their debt.
Conversely, consumers with low credit card utilization rates are considered as low-risk because they only use a small portion of their available credit and have a little buffer of available cash in case a financial issue arises.
Ultimately, you want to work on paying down your credit card balances to a credit utilization rate of 20% or less because it will increase your credit scores and make you look more attractive to potential lenders.
Pay your bills on time
Your payment history plays the largest part in influencing your credit scores.
Paying your bills late is a surefire way to destroy your credit.
When you decide to take action on improving your credit scores, it is of the utmost importance to pay your bills on-time, every time.
The last 6 months of your payment history has the greatest impact on your credit scores so work on putting together 6 straight months of perfect payment history and you will see your scores go up.
Determine whether or not you may need to establish credit
If your credit report does not contain any open and active revolving accounts, establishing some credit by opening a credit card will help to increase your scores.
A new credit card will help potential lenders show that you have changed your ways by paying your bills on time and keeping a low credit utilization rate.
As your credit card ages, it will grow your ‘length of credit history’ which is 15% of your credit score.
If your credit lacks any open accounts, obtaining a credit card will help boost your credit scores.
Note: If you can’t get approved for an unsecured credit card, try applying for a secured credit card or ask a family member to add you as an authorized user to one of their cards.
Limit your credit applications
Every time you apply for credit, a hard inquiry is added to your credit report.
An inquiry is a record of you applying for credit and having too many inquiries will lower your credit score.
If you absolutely must apply for credit, like in the example above where you need to establish credit, limit yourself to one inquiry every 6 months.
Otherwise, stop applying for credit and as your old inquiries age off your reports, your scores will increase.
Consider hiring a reputable credit repair service
If you’re interested in improving your credit scores, hiring a professional credit repair service to work on removing past derogatory information is paramount to getting the most out of your credit repair.
CreditFirm.Net has helped thousands of consumers just like you remove negative information from their credit reports and improve their credit scores.
Since 1997, we have helped our clients purchase homes, get low-interest auto loans, and save millions of dollars by improving their credit scores.
Will you be our next success story?