We're an affiliate
Just so you know, we may collect a share of sales or other compensation from the links on this page.
First, you’ll want to check your credit score. Your report should include information about the factors that are affecting your scores the most. Two of the most important factors that determine your credit score is your credit utilization rate and payment history. Together, they represent 70 percent of your score. Furthermore, the length of your credit history, types of credit and credit inquiries calculates the remainder of your credit score.
Apply for a Secured Card
If you can’t get approved for an unsecured card, apply for a secured one. It can improve your credit score and build your credit history. If you get approved for a secured card, you’ll be required to make a security deposit. For example, if your security deposit is $200, you’ll have a $200 credit limit. If you don’t make your payments, the creditor will take money from your security deposit. Eventually, the creditor may give you an unsecured card.
Be an Authorized User
Consider asking one of your family members who manages their credit and finances well if you get be an authorized user on their card. To get someone to agree, let them know that you have no intention in using the credit card and that you want to be an authorized user to raise your credit score.
Additionally, being an authorized user on another person’s card has a lot of benefits. First, their account will show up on your credit report. So, if they make on-time payments, it’ll boost your credit score. Furthermore, your credit utilization ratio may improve, further raising your credit score depending on if the card’s limit and its current balance.
Pay Before or on the Due Date
When you apply for a credit card or loan, creditors will look to see if you pay your bills late. If you’re currently in arrears, try to start making on-time payments. Paying your bills late will hurt your credit score.
Additionally, be sure to pay all of your bills by their due dates. This includes your rent, utilities, phone bill, auto loans and student loans. To help you remember to pay your bills by their due dates, consider signing up for automatic payment or calendar reminders.
If you’re currently behind on your bills, try to pay them as soon as possible. Thankfully, even though late or missed payments stay on your credit report for seven years, their impact on your credit score declines as time goes on. Recent activity has more weight.
Diversify Your Credit
Diverse accounts affect 10 percent of your credit score. For example, if you currently have an auto loan, student loan and mortgage, adding a credit card to the mix may improve your credit score.
Pay off Debt
As mentioned previously, your credit utilization ratio is an important factor in determining your credit score. It’s calculated by adding all of your current debt and dividing it by your total credit limit.
You should try to keep your credit utilization rate at 30 percent or less. Keeping it at 10 percent or less will further improve your credit score. Lenders like to see you have a low utilization rate because it tells them you haven’t reached your credit limits and you know how to manage credit well.
Apply for Credit Only If Needed
Don’t apply for lines of credit just to try to improve your credit score. Furthermore, applying for credit can cause lenders to create a hard inquiry, and it can negatively affect your score. They’ll stay on your credit report for two years. Additionally, applying for too much credit may make it difficult to resist overspending. If you overspend, you may hurt your utilization ratio, negatively affecting your credit score.
Ask for Higher Limits
Ask your current creditors to increase your credit limits without performing a hard inquiry. If your credit limit increases and your overall balance stays the same, your credit utilization ratio will decrease.
Don’t Close Accounts
Don’t close accounts you don’t use unless you’re paying an annual or monthly fee. Additionally, closing an account may increase your utilization ratio, and the age of your accounts matter. If you have to close accounts, close those that are newer.
Communicate
If you know you can’t pay a bill, call your creditors to ask if you can skip a payment. Ask them if they’ll the missed payment to the credit bureaus. Additionally, if you’re having problems paying a lot of your bills, ask to set up a payment plan.
Consider Debt Consolidation
When you first enroll in a consolidation program for your debt, your credit score may temporarily decline. Fortunately, it’ll quickly improve if you make on-time payments.
Be Cautious Paying off Old Debt
If a debt is “charged off” by the creditor, it means they don’t expect further payments. If you make a payment on an account that’s been charged off, it’ll lower your credit score and reactivate your debt.
Dispute Inaccuracies
Check your credit report from all three major credit bureaus for any inaccuracies. The three major credit bureaus are TransUnion, Experian and Equifax. Any information that isn’t correct on your credit reports could decrease your credit scores. If you see any information that’s incorrect, dispute it immediately. The credit bureaus have 30 days to investigate and respond to your dispute.
Additionally, monitoring your credit report on a regular basis can help you spot incorrect information before they do damage.
Final Words
Unfortunately, it takes a long time to remove negative information from your credit report. The length of time it takes to rebuild your credit history depends on various factors. Here’s how long some negative information stays on your report:
- Delinquencies: Seven years
- Public records: Seven years
- Bankruptcies: 10 years
Thankfully, you may see your credit score increase in three to six months if you practice good habits. Remember, having good credit will lower your interest rates, make it easier to get approved for lines of credit and more.