Here are some great methods you can use to help improve your credit score and get your rating back on track. These tips will help you if you are looking to purchase a new home, apply for a vehicle loan or college financial aid, or if you are just wanting to clean up some old bad accounts that are still showing on your 3 credit scores.
Obtain Your Credit Report from All Three Credit Bureaus
The first step to improving your credit score is to know where you stand with each credit reporting agency. Because lenders may report your credit data to one, two or all of the credit bureaus, it is important to get your score and credit report from all three companies; TransUnion, Equifax and Experian.
Examine Your Credit Reports
Closely examine each report for errors or mistakes. If you do not recognize an account in the Trade Lines section
of one of your credit reports, immediately dispute the entry. Click here for a Sample Credit Dispute Letter you can send to the credit bureaus.
Resolve Collection or Delinquent Accounts
Research the Collections/Judgement area of your credit report. This section will show any bad accounts that may have been sent to collection or any late payments you may owe. Contact the collection agencies or accounts that show delinquent and attempt to make them current if possible
Pay Your Bills
By paying your bills on time and in full, you eliminate the chance of making late payments or missing them entirely which will negatively affect your credit score.
Pay Off Revolving Credit Balances
By paying off credit card and other revolving credit balances, you will lower your debt to income ratio and, in turn, improve your credit score. By paying more than your monthly minimum payment, you will also incur less interest paid and pay off your credit card balance quicker.
Don’t Apply for More Credit
One of the worst things you can do when trying to clean up your credit score is to take out additional revolving loans (credit cards) or apply for lines of credit. You will decrease the effectiveness of your other efforts to boost your score, as well as pay higher interest rates before your score is back in a “Good Credit” range.
Don’t Close Unused Accounts
While it may seem tempting to close the accounts of credit cards you aren’t currently using, having available credit lines with no balance can actually help your score. It shows that you are able to maintain credit lines without having large balances. A good rule is to keep 2 or 3 open revolving lines of credit if possible that have no current balance.
Separate Your Accounts After a Divorce
After obtaining a legal divorce, you will still be required to pay off any joint credit accounts, however you will also be necessary for each party to re-establish their own credit. When doing this, start off slowly and build up your independent credit over a few years. Resist the urge to open multiple lines of credit quickly after your divorce, as this can have a negative impact on your credit score and rating.
Avoid Excessive Amounts of Credit Inquiries
Many people don’t realize that each time a lender, business or prospective employer runs your credit report, your credit score is lowered slightly, sometimes up to 5 points. Only have your credit report run when absolutely necessary. You can receive your free credit reports from the three major credit bureaus once a year with no deduction in points to your score. Avoid excessive credit inquiries to keep your score in good shape
Don’t Consolidate Balances on One Credit Card
By moving the balances from multiple credit cards to just one card, you will likely be maxing the credit limit of that card, which will negatively impact your credit score. Unless you can significantly save on your interest by doing this, its better for your overall credit score to keep smaller balances on several cards.