Credit scores play a big role in determining whether you’ll qualify for a loan or a credit card and what those terms will be. If you have a good credit score you can qualify for better interest rates and even no money down on high ticketed items such as a home or a car.
But how about if you have already caused damage to your credit and you need to improve your score so you can qualify for better rates.
Well, here are 11 easy steps that will help you get back and stay on track of your credit score. Many of these steps are the same tactics that credit fixing companies use to increase your credit score however, these are all things you can do on your own if you are willing to put in small amount of work into your future.
How to improve Your Credit Score in 11 easy steps
Get your Free Credit Report & Score.
You can download one free credit report each year at annualcreditreport.com and if you want to get your credit score, you can sign up for free at creditkarma.com.
Check for errors in your credit report.
If you find any errors, correct them immediately. Contact the lender to let them know about the error. Be sure you get the name and ID number of the representative you speak with and follow up right away with an email and/or fax to the company about the issue and the agreement you have arrived to resolve it.
Get bad marks off your credit report
Have you missed any payments and have bad marks on your credit report? Contact the Consumer Financial Protection Bureau to help you arrive at an agreement with the lender to get the bad marks removed from your report.
Find out how to get submit a complaint to the Consumer Financial Protection Bureau here.
Whatever agreement you arrive with lenders be sure to follow through with your promise and pay on time. It is important that whatever amount you agree to pay the lenders on a monthly basis is something you are comfortable paying. If you can only offer $10, then by all means offer $10 and explain the reason why and your plans to pay off the debt.
Freeze credit reports
There are three major credit reporting agencies in the United State: TransUnion, Equifax and Experian. Lenders can choose which agency to report to or they can report to all three. However, you as the consumer, have the right to choose to freeze your credit reports so lenders do not have access to it.
The great benefit of freezing your credit reports is that you can keep one of them active so lenders will only have access to that one, keeping the other two free of any hard inquiries or you can also free the credit reports with all the hard inquiries forcing lenders to only have access to the credit report you want them to have access to.
You may also enjoy: The 6 factors that affect your credit score
Create debt to have a good credit.
In order to have good credit you must have debt, that is actually one of the main factors that determines a credit score and I have discussed that right here on the 6 factors that affect your credit score. So you'll want to create some debt.
Combine Hard Inquiries into one
Now that you have to create some debt you want to consider the impact of hard inquiries on your credit score. Each hard inquiry can have an impact of about 5 to 6 points on your score. However, multiple inquiries about your credit score from the same type of lender are counted as one if submitted over a short period of time.
Also, when applying for a credit cards, consider applying for three to five credits the same day from the same company, this would also be combined into one hard inquiry instead of multiple even though your are applying for multiple credit cards.
Shop smart for credit cards
Now that you are in the market for credit cards, there are a lot of things to consider. First and foremost are what kind of credit cards are best for you and this truly varies from person to person depending on needs and wants. Check out the US Credit Card Guide to help you arrive at a decision that best suits your needs.
Also keep in mind that if your credit is brand new or very low, you may opt for a secured credit card.
Manage different types of credits
Lenders like to see that you can manage all types of credit, consider taking out a small loan and paying off 90% off of it right away and then pay off remainder for the full course of the loan.
For example, you can get a loan of $450 with this company for a term of 72 months at 4%, pay off $405 right away then pay off $45 in the course of 72 months at 4% rate.
Avoid finance companies.
Even if you pay off their loan on time, the interest is high and it may be considered a sign of poor credit management.
Don’t use all credit that is available to you
Only spend what you have available on your bank account today. Just because you have a $2,000 or $5,000 credit limit, it does not mean you have that money unless it is in your bank account.
Use credit card with the purpose of accumulating points, mileages, cash backs and to pay for certain items and services that only accept credit cards such as car and hotel rentals.
You can avoid the credit card interest fees by transferring the money from your bank account directly to your credit card account once the purchase is made. This will help you from ever going over your limit and paying interest fees ever!