You can't improve something
that you aren't familiar with! Take time to get a credit report from
each of the three major reporting agencies (Equifax, Transunion, and
Experian) You may find mistakes or negative items on your credit
history that you weren't aware of! As a consumer, you are entitled to
one free credit report a year from each credit bureau! Take
advantage! Call (877) 322-8228 or go online to
www.annualcreditreport.com
to get your free report!
2.
Get Those Credit Card Ratios DOWN.
What is your credit card limit?
$500.00? $10,000.00? What is your balance on that card right now? If
you are spending more than 50% of the limit on any credit card, your
score will be affected negatively! Try to pay those cards down as
much as your finances allow, even if you can only pay one at a time.
Whether you're making the minimum payments on time or not, spending
more than 50% is hurting your credit score every single month! On the flip side, if you're spending LESS than 50%, then your credit score is impacted positively every single month!
3.
Consolidate the Credit Card Debt.
If
you have multiple credit cards and you can't afford to pay all of
them down at once, take a good look at the different utilization
ratios on each one. If it's possible for you to merge the multiple
debts onto one credit card, then do it! Once your debt is minimized
or combined, don't close out the empty cards that you're no longer
using; keep those open and empty so they can continue to impact your
score positively every month. The goal is to have as many credit card
balances below 50% of their limit as you possibly can.
4.
Expand Your Credit Mix.
10% of your FICO scores are
based on the types of credit in use. Expanding your credit mix with
loans and credit cards will have a positive effect on your score and
will continue to build your credit history if you use those lines
responsibly. It's important to know your credit rating before you
begin applying for new lines of credit. You'll have a good idea as to
what you will be approved for and how much you'll be paying in
interest! For more information on how the FICO scores are generated,
you can read my post, "What Is Credit?". You can also find many useful tools and facts on www.myfico.com.
5. Wipe Away the Grime!
Once you've become
familiar with your credit reports, you may discover that you've got
some cleaning up to do! If you've got some minor negative items such
as late payments and small collections, do what you can
to wipe them away and leave your reports sparkling clean! A lot of
creditors are willing to remove a late payment or two if you just
write them a letter, kindly asking for help in repairing your credit
history. A small collection can also be removed from the reports if
you can get in contact with the collection agency and offer to pay
the debt in exchange for a letter of deletion to be sent to
the credit bureaus. If you have more negative items than you can
handle on your own, a credit repair service just might be the right
solution for you! Consider doing some research on the CROA (Credit
Repair Organization Act) and the FCRA (Fair Credit Reporting Act) to
educate yourself on your rights as a consumer in regard to disputing
negative items on your credit profile!
As I have said before, there will
never be a shortage of useful information on the credit industry. The
facts and calculations can bury you in a mess of misconceptions and
mistakes, but if you can start with these 5 basic tips, you will be
well on your way to recovering your glowing credit score!
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