A good Credit Rating plays an integral part in your life. It determines the cost and ease of almost everything you want and need: getting a mortgage, renting an apartment, purchasing a car - it can even affect the amount you pay for that car’s insurance! In some cases, a low credit rating can interfere with your chances of getting a job – such as with the government or a financial institution.
The good news is that it’s not hard to improve your credit rating, but it does take time, and it does take effort on a regular basis to turn things around.
First, get a copy of your Credit Report. This is the most important weapon in your arsenal to combat low credit ratings. It shows where you stand and highlights ways to improve your credit. Check it over carefully. Compare the information with what you have in your personal records.
DO: Take steps to correct anything on the Credit Report that doesn’t agree with your own records.
DO: Remove any collection items from your Credit Report that you’ve cleared up.
DON’T: Remove old debt that’s been paid off - like your home or car – from your Credit Report. It’s positive to show a long history of good debt in a solid repayment record.
Now, start paying off overdue debt. Pay off small balances first – clearing off as many cards as soon as possible. After paying off past-due accounts, leave those accounts open, don’t cancel them. Open accounts in good standing, even with a zero balance, can improve your credit score.
If you have ‘thin’ credit history, it’s important to ‘fatten’ it up. Get a secured credit card as well as a vehicle loan or a mortgage. It’s important to show that you can effectively handle revolving credit (credit card) as well as installment credit (mortgage). However, don’t rush out to get new credit – if you apply for a lot of credit in a short time it sends up red flags.
Pay all monthly household bills on time. Mark their due dates on a calendar or consider pre-authorized debit. If you’ve fallen behind in any of your accounts, pay off the older ones first.
When it comes to loans, always make a full monthly payment, and try to pay the loan off before the end of its period.
Credit Cards can make or break a credit report. If possible, pay your credit card in full each month. If not, pay more than the minimum payment. Never make less than the minimum payment. If you must keep a balance, keep it under 30 percent creditors take into account the amount of credit you have left and the amount you’ve used. Raise the amount of credit available on your card, but don’t spend any more. Don’t close off an old credit card but instead, use it a couple of times a year and pay it off at the end of each month you use it. This builds a positive credit history.
If you’re looking for a car, a mortgage or even a student loan, shop for rates within a 30 day period. Every time you apply for credit, it can cause a small drop in your credit score that remains on your record for a year. However, with auto, mortgage, and student loans a formula is used that notes the many applications but acknowledges only one loan. So it’ll be only one drop in your score, not many.
We’ve gone through a lot of ways to help to improve your credit rating, but it is still not quite enough.
We have to go all the way back to the Credit Report, the linchpin to improving your credit rating, and maintaining it. It’s a case of ‘once is not enough’. You need to monitor your credit rating a few times a year to catch any errors or missed information. And it won’t cost you a dollar! You’re entitled to one free Credit Report from each of the following organizations: Experian, TransUnion and Equifax. If you send for one every four months you can keep a close eye on your credit year round. And, as you see your credit rating improve, you can plan more successfully to live the life you want and deserve to live!