It’s simple: The better credit you have, the better your financial life can be.*
On the other hand, if you have poor credit, you could have trouble getting a loan. If you do get one, it may have hidden fees or high interest rates. Having poor credit could make it more difficult to rent an apartment or get a cell phone contract. You may pay higher insurance premiums, too. While you can’t completely fix your credit score overnight, there are some things you can do today to start improving it.
1. Check Your Credit Report.
The first step to improving your credit score is to determine how much improvement you need. You can obtain a free copy of your credit report at: https://www.annualcreditreport.com/index.action
There are three main credit reporting agencies: Experian, Equifax, and TransUnion. Credit scores generally range between 300 to 850. A good credit score is typically 700 or above; a fair credit score is generally between 650 and 699; a poor score is around 600 to 649; and a score below 600 is considered a bad credit score.
Review your score, then look at the items on your credit report from each credit reporting agency. If those items match across those reports, move on to the next step. If anything is listed that shouldn’t be, or is listed improperly, report the discrepancies to the appropriate credit reporting agency. While some errors won’t affect your score, some will. So, review all just to be safe.
2. Leave old debt alone.
While negative items are bad for your credit score, most will drop off your credit report after seven years. Good debt—debt that you are paying (or have already paid) on time—is good for your credit. That includes old debt. There’s no reason to try to have old debt removed simply because it’s old. Good debt, whether new or old, is good for your credit score, and the longer your history of good debt is, the more it helps your score.
3. Pay your bills on time.
If you are making timely payments on your bills, keep doing it. If you aren’t paying your bills on time, start paying them on time. One of the biggest factors in your credit score is a history of on-time payments. Having a history of late payments and bills being sent to collections could harm your ability to get financing for bigger purchases, no matter your income or savings account. Use a monthly calendar to plot out all your bills, then make sure to make payments on or before their due dates.
4. Take charge of your credit cards.
Your credit score can be affected by how much of your available credit you’re using on your credit cards. The smaller the percentage—aim for 30 percent or lower—the better your credit score could be. Limit yourself to one or two credit cards, try to pay down your balances monthly, and keep them low. If your credit is so bad that you can no longer get a credit card, consider applying for a secured credit card. Your credit limit will match the deposit amount that you need to make beforehand, but if you use it regularly and responsibly, you could start to see your credit score rise.
The amount of time it will take to boost your credit score depends on how low it is now and how much work you must do to boost it. However, if you’re patient and persistent, all the time and effort could be worth it.
