The FICO credit score is the standard credit score accepted by companies. Many companies depend on this score to make decisions on loans and employments.
Your credit score shows your creditworthiness. A high credit score presents several advantages to the credit score holder. If you have a good credit score you can access several good lending opportunities. Lender will offer you unsecured loans at low interest rates. Due to these advantages, you should make it a point to maintain a good credit score. If you have a bad credit score right now, do not fret too much. You can improve your credit score by using these tips.
- Review your credit report
The first thing to do is to check your credit report. This will help you to know how bad your good your credit score is. Reviewing your credit report will also help you identify errors in the report. When you spot an error, you should file a dispute for it to be removed from your report. When you make early payments and it has been reported as late payment, you can file a dispute. You can also report wrong accounts on your report. Also, when bankruptcy information stays on your credit report for more than 7 years (in some cases 10 years), you should report for it to be removed. You should also make verify that your personal details are correct.
There are three methods of filing reports. You can call the credit reporting bureaus, file the dispute by visiting the website, or send a mail to the credit reporting bureau. If you want to file a dispute by calling the credit bureau, you should call the number on your report. You can also visit their website (Equifax, TransUnion, or Experian) to file the dispute. Depending on the credit bureau you are dealing with, you can send a mail to the following addresses.
PO Box 740256
Atlanta, GA 30374-0256
Consumer Dispute Center
PO Box 2000
Chester, PA 19016
PO Box 4500
Allen, TX 75013
You should submit any document that supports your claim and clearly indicate the error in writing.
The credit reporting bureau will take it from there. They will investigate the issue. Usually, they contact the information provider for clarifications. The credit reporting bureau will contact you with the results of the investigations. This process can take up to 45 days. The bureau will produce the result of the investigations in writing. They will also add a free copy of your credit report. If the results indicate that the is indeed an error in your report, they will correct the information. They will also send the information to other credit reporting bureaus. You can also request that the corrected report be sent to all organizations that have requested your credit report within the last six months.
If the wrong information is affecting your credit score, once it is corrected, it will have a positive impact on your score.
- Another important action to take is to pay down your debts.
This is not an easy task but you can do it if you set your mind to it. Paying down your debts can help you to increase your credit score. You should begin by writing down all your debts, then you can plan how to repay them. You should adjust your lifestyle free some cash for payments. If you love going to luxury restaurants or you are someone who engages in impulse buying, you should cut down on that. You should also save some extra cash by taking a break from those expensive meals. Some people even stop carrying their credit cards around so that they are not tempted to spend more. Some even go to the extent of freezing their credit cards. Once you free up some cash and you have a plan as well, you can start paying the defaulted loans first. When you begin to pay up your loans without missing payments, your credit report improves.
- Pay your loans on time
Paying up your loan on time has positive impacts on your credit score. It is therefore important to set payment reminders and pay on the due date. It is not advisable to ignore your current debts to pay off old debts. You should plan well so that you do not ignore your current loans.
- Consider loan consolidation
If you realize that you cannot make enough to improve your credit score, you can consider loan consolidation. With loan consolidation, a loan consolidation company will negotiate with your lenders on your behalf. They will pay off your loans and then put your debts together. You will now make a single payment every month instead of the numerous different payments. The good thing about loan consolidation is that you can negotiate your repayment terms. The interest rate on your loan will be lower than the previous one and you can save on interest rates. After consolidating your loan, if you make payments on time, your credit score will improve quickly. When you successfully consolidate your loan, make sure you do not miss payments.
- Do not close old credit card accounts
Age matters when it comes to credit card accounts. Old credit card accounts look good on your credit report. If you need to close some credit card accounts, close new ones.
- Work towards reducing your credit utilization ratio
If you want to improve your credit score, you should try to reduce your credit utilization ratio. The credit utilization ratio is the total credit card balances divided by the total credit limit. In the process of calculating your credit score, you credit utilization ratio is considered. People with good credit scores have ratios less than 30%. A low credit utilization ratio shows that you manage your credit well. Keeping your credit card balances low can help to lower your ratio. You can also let someone with good credit add you as an authorized user to his or her account. If you want to use this method, you should do it with someone you trust. Someone who will not miss payments on the credit card. This is because when they do something to affect their credit score negatively, it will affect you as well. However, if the person as good credit, you can benefit from the credit limit. This increases your credit limit thereby reducing your credit utilization ratio. You can also ask your credit card company to increase your credit limit. Some companies will agree but others will not. If the credit card company agrees and increases your credit limit, your credit utilization ratio will reduce thereby improving your credit score.
- Apply for new credit cautiously
In a bid to increase your credit score, you may be tempted to get new credits to increase your credit limit. You should be careful when you decide to do this. When you open several new accounts within a short period, your credit score will be affected negatively.
- Pay more than once in a month
Instead of making monthly payments, you can start to make payments twice in a month. Multiple small payments called micro payments can even be a routine activity. You can even treat your credit card like a debit card. When you make purchases, you pay up. This will count as micro payments. This will improve your credit utilization ratio helping you to build a better credit score.
- Diversify your accounts
Your credit mix contributes 10% of your credit score. A good mix will be credit cards, mortgage, student loans, and auto loans. If you do not have a credit card, you should consider getting one to mix up your accounts. However, do not spend beyond your limits. You should also make timely payments on your new card to improve your report.
When you are trying to improve your credit, you should be patient. It can take a long time to improve but you should continue to work towards it. It usually takes between 3 to 6 months for you to see changes in your credit score. If you are having problems repairing your credit by yourself, you can consult a credit repair company to help you out. They will guide you through the process. You can also seek credit counseling to help you to manage your finances. They will help you to maintain an efficient budget and get a good grip over your finances.
When you finally improve your credit, make sure you do not accumulate debt to destroy the credit you have built over time. You should also try to take good control over your credit report. The three major credit reporting bureaus – Equifax, TransUnion, and Experian allow you to access one free credit report every 12 months. You can decide to access them in four month intervals. In that way, you can check your credit report every four months. Although the items on each report may be different, you will have a fair idea on the content of your credit report. This helps you to act fast when you notice any errors in your report.