Viewing your credit history is the first step to improving your credit score. Credit bureaus keep a record of the money you borrow as well as your ability to pay it back and how quickly you pay it back. It is not just banks that evaluate your credit history. Insurance companies, mobile phone companies, government departments, landlords, and other organizations will also access and use the information in your credit report before providing their services. However, if you have a history of troubled finance, there are things you can do to repair your poor credit and boost your credit score.
You may be surprised to know about all the different factors that can have an effect on your credit score. From correcting simple mistakes to paying off your loans in a more consistent manner, there are several steps you can take to make your credit history look better in the eyes of anyone who examines it. Read on for steps you can take to gain better control of your finances and make a fresh start. You can increase the chances of getting the loan you need and improve the quality of your life.
Understanding Your Credit Score
Your payment patterns over time collectively make up your credit report although emphasis is placed on recent information and activity. Lenders review your debt history to determine the risk you pose for them. Your score is not saved as part of your credit history, and it is only calculated when a lender requests your credit report from a credit bureau. Repairing your credit history is possible no matter your financial situation, but it takes time and patience.
Order a Free Copy of Your Credit Report
In a twelve month period, the three main credit bureaus, TransUnion, Equifax and Experian, will provide copies of your credit reports for free. You don’t know which report your lender will examine, so it’s a good idea to evaluate all three. Also, your FICO score is calculated from information provided by these three major credit bureaus. Thoroughly go over each report and identify any mistakes because bank and credit card companies do occasionally make a mistake that will unnecessarily bring down your credit score. If you discover inaccurate statements in your report, contact the credit reporting agency and formally ask that they be removed . Examples of mistakes include:
- Your ex has not paid off an old bill.
- Your identity was stolen and someone else is using your credit card.
- Your credit information has been mixed with another person who has a similar name.
- An old collection account from more than seven years ago is still on your report.
Use Credit Responsibly
You can’t change your score, but you can manage credit properly and rebuild your credit history, which will reflect upon your score. If you have an accurate report but still have a low score, here are the some important factors that look suspicious and that could be impacting your credit score:
- Maxed out credit cards
- History of late payments
- Applying for many credit cards
- New to credit and you never borrowed before
- Lack of proof you can handle different types of credit such as credit cards and mortgage payments
Pay Down Credit Card Balances
Make regular payments on your credit card and keep balances low. This is an essential step to take to keep your personal expenses in check as you work towards repairing credit. An important factor of your credit score is how much credit you have and how much you are using. The ideal amount you should owe on your credit card at any given time is 30 percent of the credit available to you.
Reduce the Number of Credit Cards You Have With a Balance
If you own several credit cards and have small balances on each one, it can lower your credit score. Over a length of time, your credit rating will be hurt by using too many credit resources and not paying them off on time. Eliminating nuisance balances, consolidating credit accounts, and using one or two credit cards for your monthly purchases is ideal for raising your score and having the best credit score possible.
Old Debt Is Not Always Bad
You may consider taking off old debt thinking if it is paid off, it is not necessary to keep it in your records. Statements remain on your record for seven years; however, good credit proves you’ve handled the debt well and paid it back as agreed. This will reflect positively on your overall history and help you achieve a higher score.
Pay Bills at the Right Time
Credit scores are all about how you pay your bills, so even if you’re trying to save up for a big purchase, forgetting to pay existing loans can affect your ability to get the big loan you need. Monitor all credit accounts and month after month make on-time payments. Even if you owe cash to a creditor that does not report to the bureaus, such as a library, if you don’t pay the balance, they could eventually call the collections agency and the agency will list it on your report.
Stick with a Pattern and Maintain a Schedule
Every activity will either hurt or benefit your score. Making sudden changes by making late payments or reducing the amount you pay is risky behavior that could sink your score. Other risky behaviors include taking cash advances or using your card at businesses that could indicate future financial stress. This could be using it to pay for a divorce attorney or at a pawn shop.
Improve Your Score and Reap the Benefits
Having a poor credit score is expensive and leaves you with a lot of stress because it feels like you can’t leave the past behind. It often means lenders will charge you a higher interest rate for house and auto loans, and you will find it becomes hard to receive student loans. Many people work continuously to improve their credit history and gain a higher credit score, and you can do it too by understanding the process and implementing responsible credit tactics and taking these simple preventative measures.