How to improve your credit
Start Building or Establishing Your Credit Score With Simple Yet Effective Steps
Why Is Bad Credit So Bad?
Bad credit scores range from 300 to 629 with most major credit bureaus.
It’s a pain when we want to buy a new car, purchase a home or take out a loan to fund our business endeavors—and get told we’ve been denied due to a poor credit report and score.
Bad credit scores are more than just a low number—they represent financial challenges that can lead lenders to assume we’re risky investments.
We all deserve financial independence and security. The best way to do it is through repairing our credit scores.
What Affects Your Credit Score?
Your credit report is a summary of the following factors:
Payment history (35%): The overall credit history of past and present accounts and payments
Accounts owed (30%): The number of open accounts and their collective balances
Length of credit history (15%): The age of your credit history from your oldest to newest accounts
New credit (10%): Any recent soft or hard inquiries on your credit report
Credit mix (10%): The type of accounts you own, such as owing on credit cards and a mortgage
Quick Tips: When you 1) use less than 30% of your credit limit, 2) keep down the number of open accounts, and 3) make your payments on time, your credit score is boosted up into the fair to excellent range of 630 to 850.
How Can You Rebuild or Establish Your Credit Score Today?
Review Your Credit Report
When you have a clear picture of every account on your credit, you’re able to make a plan to start repairing your credit.
You can check your credit report through Equifax, Experian or TransUnion, or use free credit monitoring sites like Credit Karma to evaluate your credit history.
Pay Down Old Accounts
Your credit score is severely impacted when accounts become—and stay—delinquent.
Make a list of these accounts and their recent statements to start paying what you can on them. If they’ve gone to collections, reach out to the creditors to set up payment plans within your spending and savings plan.
Pay Your New Bills On Time
As you handle past-due accounts, make sure you stay current on your newer accounts.
The bad news is debt can be difficult to break down, but the good news is it’s not impossible!
By adjusting your spending and savings plan (based on your monthly income and expenses) to accommodate your old and new bills, you’re able to manage what you owe without creating new debt.
You can do this by making a calendar of when your bills are due, and group your payments together based on your spending and savings plan.
Track Your Progress Regularly
As you get your finances in order with a solid plan of action to eliminate debt and repair your credit, keep your eye on your credit score.
You can check your credit score daily, weekly or monthly depending on your financial goals. Tracking your progress also helps you to spot any errors on your report, as well as understanding your credit’s capabilities on your way to financial security.