10 Steps to Improve your Credit Score

In the economically-fueled world of today, a bad credit score can close the door of opportunity before you even realize it happened. Do not despair; with time, diligence and consistency you can turn any credit score around and start living the life you want without worrying that your poor credit will hold you back.

Obtain your credit report and check it for errors regularly. If there are mistakes, have them fixed. There are online sites for getting your credit report, such as freecreditreport.com. You can also request your report from the three main credit reporting agencies: TransUnion, Experian and Equifax. It is suggested you check your report yearly for changes and mistakes.

If you don’t have a credit card, get one. This may not make sense, but it’s true. In order to raise your credit score, you must first establish credit. An easy way to do that is to get a small-limit, no- or low-fee credit card. Use it sparingly and make your payments. Showing steady payments of debt will increase your score.

If you can’t qualify for a regular credit card, you can apply for a secured credit card through most financial institutions. For a secured card, you make a deposit of cash to the bank to secure the card. The amount you have deposited will determine your credit limit on the card. There is a minimal risk for the bank and your credit score will improve with time.

If you already have several credit cards, don’t consolidate and close them. Closing accounts limits your credit ratio and lowers your credit availability. Instead, keep the accounts open and pay down your balances.

Make your payments on time! Sounds simple enough, but even sending in a payment a day or two overdue will wreak havoc with your credit score, as well as rack up late charges.

Pay down the balances faster on high-interest debt. By paying a little extra on the principle each month, you will quickly increase your balance-to-credit ratio. The higher this is, the better your credit score.

Use caution. Do not apply for every credit card offer that comes your way. Repeated credit checks by creditors will result in a lower score, and each time you apply for a card they check your credit. So, when the department store offers their card at the checkout, pass it by.

Use a co-signer for a loan. The lender will be assured of getting their money through the co-signer if you aren’t able to make the payments, and your credit score is helped as long as you make your payments.

Retailer programs will also help you build credit, as long as they report your payments to the credit bureaus. These programs are often monthly payments for higher-end goods such as televisions or home appliances.

Avoid revolving debt. Revolving debt is one with a limitless borrowing capacity (i.e. a home equity line of credit). This does two things: often the borrower will exceed their ability to repay this debt easily, and it also shows to financial institutions that you lack discipline. Instead use installment debt, a set amount which is borrowed and paid on a schedule until the balance is satisfied, such as a home equity loan.

Additional help with debt and credit repair can also be found at several online sites such as creditrepair.com and repairyourcredit.com. While these sites may be helpful, oftentimes there are programs available through financial institutions as well, so check with your bank to see if they may have a program that can help you.

A word of caution – as your credit score is repaired and builds into a higher rating, you will become attractive to credit card companies and they will bombard you with offers that may seem hard to refuse. Use your willpower and discipline you used to repair your credit, and ignore these offers.