For some, applying for credit is a simple and stress-free process. For others, the very thought of credit rejection is an ever-present and anxiety-ridden task. If you belong to the latter group, there are ways to strengthen your credit score and increase your chances of obtaining new credit. Read on to discover clean credit tips and how to utilize them.
- Review your credit report. While you may think your credit is under control, your credit report may be telling a completely different story. Take time to obtain and review a copy of your credit report. Verify your name, address, and all other basic information. Go through your credit items line by line, making sure to note any examples of unfair credit reporting, outright inaccuracies, or possible instances of identity theft. If you do spot inaccuracies, disputing them is the next step. Clean credit depends on a fair and accurate credit report, and it’s up to you maintain its validity.
- Pay off debt. When used correctly, debt is an effective way to establish a positive credit history. However, drowning in monthly expenses can quickly turn your credit savvy into credit slippage. Examine your monthly bills and compare them to your gross monthly income. If you are spending more than 35 percent of your available credit limits, this could create a rockier road to clean credit. Look for ways to begin paying off debts and reducing your expenses. For example, cancel your home phone line if you have a cell phone, turn off the air conditioning when you leave the house, find a tenant or roommate, etc. Every bit helps.
- Examine your credit utilization ratio. Debt accounts for 30 percent of your credit score. Your credit utilization ratio impacts this section, representing the percentage of revolving debt you hold compared with your total credit limit. If Melissa’ three credit cards carry a total balance of $10,000 and her total credit limit is $30,000, then her credit utilization ratio is 33 percent (e.g., $10,000/$30,000=.33). A great way to a clean credit score is to proactively manage this ratio. Ideally, it should never exceed 25 percent. Begin by paying down as much debt as possible. Depending upon your situation, you may also consider opening a new line of unused credit to increase your overall limit. For example, if Melissa opened another credit card with a $5,000 limit, then her credit utilization ratio would automatically drop to 28.5 percent (e.g., $10,000/$35,000=.285).
Obtaining new credit in the future depends on your past clean credit history. If you are worried about credit rejection, exercise the tips above and use them to your advantage. Check your credit score periodically to see how reduced debt and diligence has impacted your score, and apply for new credit where applicable. For expert assistance, contact Lexington Law for a free review of your credit report and score. Not only can our expert paralegals explain your credit report line-by-line, but they can offer suggestions to help accelerate your credit repair process. Your financial reputation is on the line, so don’t wait another day to repair it.