Ever feel like you just can’t get out from under your credit problems? Whether you’re just starting out in your credit journey, have started getting your credit act together, or are even working with a professional credit repair company, there are some things you can do this week to help improve your credit report and score.
1. Pay Down Your Debts
If you want to see your credit score recover quickly, paying down a credit card balance to about 10-25% of the available credit used can really make a difference. The amount of credit you use based on your percentage of your credit line used is 30% of your credit score and is called credit utilization.
In general, experts believe you have the best credit scores when you carry a credit utilization rate on all your credit cards between 1-10%. Sound incredibly low? We know this range is tough for most people to manage, so the experts say that keeping balances below 25% will have a good effect on your credit score. 25% may be a more realistic goal, but keep in mind that going even lower is optimal.
2. Learn From Past Mistakes
If you’ve had trouble with your credit in the past, it may benefit you to take a few moments to reflect on what led you into those troubles and come up with ideas for making sure you don’t repeat any mistakes. Ask yourself these questions:
- Do I tend to overspend when I go shopping because of impulse purchases?
- Do I spend more each month than I make?
- Have I not paid close enough attention to due dates on bills thereby occasionally missing deadlines?
If you find yourself answering yes to these questions, it may be time to resolve to change your ways and live a little more deliberately when it comes to finances.
3. Don’t Close Out Accounts
Average age of your accounts is 15% of your credit score, and in general, the older your average age, the better. While accounts that have been shut down on the part of the bank due to delinquencies will stay on for 7 years after they are closed, paid, accounts closed by you stay on your credit report for 10 years If you make it a habit to close out old accounts that you don’t use, you could find yourself lowering the average age of the accounts listed on your credit report. It doesn’t hurt to keep an account open, even if you never use it, so the policy should be to leave well alone. If you are having trouble managing a credit account because of temptation, try to exercise a little self-control and not charge anything else to the account instead of closing it.
4. Create a Budget
Making a budget really gets a bad rap – visions of pinching pennies and overbearing restrictions leap to mind. It doesn’t have to be a lock on your life – you can easily still have fun and joy in your life while sticking to a budget. Having a budget will mean that you will be able to make all your payments on time, and thus aid your credit score: your payment history is 35% of your credit score. Having a budget can improve your credit score in other ways:
- You will be less reliant on credit so you can keep your debt down.
- You will be less likely to forget due dates.
- You will be less likely to repeat mistakes you’ve made in the past in spending too much money, making it difficult to pay on time.
5. Take Out New Credit to Improve Your Score
If your credit is not where you’d like it to be, opening a new credit account will aid you in building up that credit score. You can open a secured credit card account, by depositing money into an account and getting an equal amount of credit line against which you can make credit card charges. If you do this, make sure that the credit card issuer will report your payment history to the credit bureaus so you get the proper credit. You can also buy a certificate of deposit (CD), and then borrow against it, essentially using it as security. Many credit unions will let you do this, and they will report your payment history to the credit bureaus so that is reflected on your credit report.