More often than not, we never think of our credit score until it’s time to buy a car or apply for a mortgage.
Since it’s not at the forefront of people’s minds on any given day, it may come as a shock to learn you have a lower credit score than you may have previously estimated.
In a tough economy good credit is essential, so how can you bump up that score to stand a chance with lenders?
First of all, take account of your current situation. Are you paying your bills on time or have you found yourself living paycheck-to-paycheck? If you have struggled to make minimum payments each month, fixing your credit will be more difficult, but not impossible.
Obtain a copy of your credit report and dispute any inaccurate information. If unpaid accounts are present, pay them. You may find a quick call to the company can produce a better resolution.
Some people who have experience financial woes in the past, such as foreclosures or bankruptcy, may consider living a cash-only lifestyle. This will never boost your scores and it will only take longer to recover.
Apply for a low-balance credit card if you don’t already have one, make modest purchases and double up on those minimum payments. It’s even a good idea to use any savings you may have to completely pay off the card’s balance every month.
If you already have one or two credit cards, don’t apply for anymore. You may be tempted to improve your credit score by maintaining low balances on multiple cards, but there’s always the temptation to max out every card. Getting into that situation with several cards will only put more strain on your financial situation.
Create healthier habits. Online bill-pay may be more convenient, but some people lose sight of the amount of money they’re spending in auto-drafted bills. Switch back to mail-in bills and write those checks personally.
On that same note, keep better track of your savings by keeping debit card purchases to a minimum. Swiping plastic is a cinch, but it distracts us as to the amount of money we’re really spending. Write checks when vendors accept them or withdraw cash from the ATM for store purchases.
Never close unused credit card accounts. If you’re trying to improve your credit score, closing accounts always hurts and can even make your score drop.
A better alternative is to cut up unused credit cards or hide them so you won’t be tempted to use them.
It’s especially important to keep old accounts open. The older the account, the more you’ll come across as an established, responsible consumer.
Use savings to pay down high balances. Perhaps you’ve built up savings for a house but still need to apply for a mortgage. Using the savings to pay down credit card balances will make you look better to potential mortgage lenders because your debt-to-income ratio will be much better.
If you’re at a loss as to how to improve your credit, don’t turn to credit repair companies. Many people find they end up spending hundreds of dollars on credit repair services only to end up disheartened, with fewer savings.
When you do need extra help, seek out local non-profit counselling services or schedule a free legal consultation. You can clean up your credit by yourself; it just takes a little extra time and effort.