Improving your credit score can be an intimidating task for many. It often involves many hours of reviewing credit reports, negotiating with creditors and communicating with various credit agencies. But it’s definitely worth the time and effort. Here are six key steps that can help you improve your credit score.
1. Get hard copies of all your credit reports
You are able to get a free hard copy of your credit reports from each credit agency once a year, (Equifax.com, Experian.com, Transunion.com and Innovis.com) or by contacting Annual Credit Report.com
2. Review your report for errors and derogatory information
It is essential that you understand what’s on your credit report. A hard copy is much easier to go through and gives your the ability to both highlight your report for errors and identify which accounts are in good standing or derogatory. Focus on confronting what is hurting your credit (delinquencies, collection accounts) Anything that was not paid as agreed is likely having a negative impact on your credit.
3. Open a secured credit card
If you do not have an open credit account then opening one will help improve your credit. Opening a secured credit card will positively impact the factors that contribute to a good score. Those factors include payment history 35%, credit utilization rate 30% and type of credit or credit mix 10%. These credit score factors account for 75% of your credit score. Also make sure that your secured card reports to all the major credit bureaus not just one. Although you may still have negative information on your credit file, improving the positive credit account information will help improve your credit score.
4. Dispute errors
All errors should be immediately disputed with the respective credit agencies. The credit bureaus in turn have 30 days to respond to your dispute(s). Also if you have collection accounts or public records older than 5 years listed on your report, be aware that they are close to being deemed legally uncollectible, due to statute of limitations laws. It may be best not to worry about those items since they will come off your report in a matter of months. (In most states unsecured debts are uncollectible after 6 years) Be careful not to submit frivolous disputes as it can result in the bureau flagging your account and not accept future disputes from you. The credit bureau will not remove information that was reported correctly by a provider.
5. Keep outstanding balances under 29%
Another way to improve your credit score is by keeping all outstanding credit accounts balances, such as credit cards, below 29%. FICO scoring algorithm monitors how you manage your credit accounts and will penalize you for carrying higher outstanding balances in relation to your account balances. Simply having a credit account is not sufficient to maximize your score – Managing it effectively does.
6. Never miss a credit account payment
No category help improve your credit score more than payment history. Your payment history is reflected in your credit report by a month to month record of made or missed payments. This is also the most weighted category in the FICO scoring formula and represents 35% of your credit score.
By ensuring your monthly credit payments are always made as agreed will help improve your credit scores. Remember, creditors seek a simplified way in which to assess risk. Although your credit scores do not tell your entire story, they reflect something about you. It is the primary method creditors use to quickly gauge your financial capacity and character. Taking these key steps will improve your credit score.