Review Your Credit History
Request a free copy of your credit report from each of the three major U.S. credit reporting agencies: Equifax, TransUnion, and Experian. Consumers are entitled to one free report per year, and it is important to request a copy and review it carefully for mistakes. Sometimes one or more of the reporting agencies include wrong information about your name, address, and credit accounts. Contact each organization that contains faulty information to make corrections. After a few weeks, request an updated copy of your report, which should be provided at no cost. Ensure that each organization made the corrections and no new problems have surfaced.
Work With Creditors
Contact all stores and companies to whom you owe money. Apologize for any missed or late payments, and explain that you plan to submit payments on time by the due date from now on. If you are unable to afford the entire payment each month, request a revised payment plan that allows you to make smaller payments on the balance. Many creditors willingly work with customers to get the outstanding balance paid in full.
Limit Credit Charges
Look over monthly credit card statements to see where you can cut costs. Avoid paying for nonessentials with credit, such as entertainment, clothing, and snacks. Instead, pay for those things with cash, which is often a deterrent in helping people avoid spontaneous spending. Charge only essential items, like a doctor’s visit or a broken appliance that you cannot otherwise afford and that you are reasonably sure you can pay off by the end of the month or within a short period of time.
Pay Off Credit Accounts
Start with your smallest credit balance, and work on paying it off as quickly as you can. You may be able to expedite payoff by adding extra to the payment beyond the minimum amount due each month. Use funds from overtime, tax returns, or windfalls to pay down the balance more rapidly. When it has been paid in full, apply that monthly payment that is no longer needed for the first account to a second credit balance, along with the regular payment due each month until it also is paid in full. By eliminating your credit balances, your credit score will clear up fast.
Pay Bills on Time
Review monthly expenses for an idea of when they come due. Make sure you pay each on time so that nothing is late. This is one of the main criteria that credit organizations assess when determining your credit score. If you must be late with the payment, call the creditor to make other arrangements, such as skipping a month or making a double payment the following month.
Live Within Your Means
Establish a monthly budget that allows you to balance income with expenses. This means that you will have a pretty good idea of what your monthly income will be and how to spend no more than what you earn. A savings account is important for short-term emergencies and long-term goals like college or a vacation. Sticking to your budget will make finances easier to manage and help to protect your credit rating.
The credit ranking score for the three main reporting agencies ranges between 300 and 900. Generally, a credit score of 750 is considered strong, while over 800 is excellent. Factors like credit type, recent credit, and debt-to-credit ratio play a role in determining a person’s credit rating. Maintaining a high credit score is important for access to credit when needed.