Advice on How to Raise a Low Credit Score
Posted on February 4th, 2010
Millions of consumers throughout the U.S. struggle with the effects of having a low credit score. Some are turned down for credit cards or vehicle loans, others learn their applications for a mortgage loan have been denied. If you are experiencing the restrictions that get imposed on people with poor credit, you may already know your credit reports are in need of repair. Today, getting information about how to repair your credit score doesn’t need to be frustrating or stressful, thanks the wealth of financial resources available to consumers.
The first step in taking control of your credit is to know what is listed on your credit reports. You can do this by ordering your credit reports for free from AnnualCreditReport.com or by calling 1-877-322-8228. This service is provided by the three largest credit bureaus in the United States; Equifax, Experian, and TransUnion. The Fair Credit Reporting Act (FCRA) entitles you to receive, by request, a free copy of your credit report from each of the credit bureaus once every 12 months.
Tips to Maintain Your Credit Score
Based on the information in your credit reports, credit scores are an important tool used by businesses and lenders to determine the likelihood that a borrower will repay a loan. Fortunately , this rating is not set in stone. It can take time, but there are many ways you can increase your credit score.
* Pay your bills on time – Your payment history makes up 35 percent of your credit score. A period of not making timely payments will cause your score to drop but since the effect of a late payment diminishes over time, being careful to make all payments on time from today on will move your credit score in the right direction.
* Contact your creditors if you are having difficulties making payments – If you anticipate that you will not be able to keep current on your payments, you may be able to make arrangements with your creditors such as temporarily deferring payments that will help you get caught up again. You could end up paying more in the long run, but if it keeps you from falling further and further behind, it will be worth it for your long term finances and for your credit score.
* Try to keep low balances on your credit cards – Outstanding debt accounts for 30 percent of your credit score. The closer you are to maxing out credit cards, the less stable your finances will look to be. Keeping credit card balances below 30 percent of the limit will make your credit utilization ratio look better which is a good thing in the credit scoring model.
* Avoid rotating your debt between credit cards – Transferring debts to a lower interest rate credit card is a good strategy when working to whittle down debt, but a history of moving balances between credit cards looks like you are robbing Peter to pay Paul instead of being able to make your monthly payments.
* Carefully study loan or credit applications before accepting them – Some loans, including retail store lines of credit, are loaded with fine print and other strings attached that can end up causing big problems down the road. For example, some no payment, no interest financing programs offered by retailers include interest rates that can skyrocket if you are late on a single payment and clauses where you may still be responsible for interest calculated during the “no interest” period.
* Use your credit cards responsibly – Keeping balances low is a start, but you should also be careful to keep the number of cards you have in check, make all payments on time, occasionally use older cards, etc. For the most part, best practices for all credit accounts apply to credit cards but given the tendency people have to let their credit card spending get out of control, responsibly using credit cards deserves special attention.
* Look into credit repair services people who need additional assistance addressing their bad credit, an excellent resource for consumers are professional credit repair services. Professionals can lend their valuable expertise on important matters like legally disputing the questionable negative listings on your credit report and specific steps you may be able to take in order to make the most of your credit.
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