Do you have bad credit?
If your credit score is less than great, you might feel like you are in a never ending cycle.
You might feel forced to choose between paying one of your many debts each month. If you don’t qualify for any loans, how will you ever build your credit back up?
The truth is, it’s possible to come back from even a terrible credit score.
Keep reading for 6 credit tips to boost your credit score.
1. Get Your Credit Report
The first step in the process of improving your credit score is finding out where exactly you stand. You’ll want to know what your credit score is and how it’s broken down, so you can focus on areas to improve.
You are entitled to a free credit report each year. You can obtain one here.
While apps that track your credit score such as Credit Sesame or Credit Karma are legitimate, the Federal Trade Commission (FTC) has issued a warning to consumers urging them to be careful of other websites claiming to offer free credit reports.
Make sure you get a report from each of the credit bureaus: Equifax, TransUnion, and Experian.
Take a look at your credit score. Credit scores range from 300 to 850. A good credit score is considered one between 700 and 740.
2. Dispute Any Errors on Your Credit Report
While looking at your credit report, you should keep an eye out for any errors.
It’s not common to find errors on your report, but it does happen. Your credit score shouldn’t suffer from something you aren’t responsible for.
If you find any errors, even if they are small, you should report them. Here what’s to do if you find an error.
Make a copy of your credit report and highlight the error. Then, gather documentation that will serve as proof of the error, such as statements from your bank.
Write a letter and send it to the credit bureau that has a credit report in your name with the error. Include the highlighted copy of your report and your proof.
For more help disputing errors on your credit report, check out this page on the FTC’s website.
3. Create a Budget
Once you’ve confirmed that your credit score is as reported, it’s time to take a hard look at your finances.
Look at your tax returns from the past couple of years to get an idea of how much money you are actually bringing home. Once you determine your current income, subtract your monthly expenses such as insurance premiums, car payments, and rent or your mortgage payment.
Then, break down your monthly spending on flexible expenses like entertainment, food, and gas. Look at how much you are really spending each month and how you can cut that back.
4. Pay Your Bills on Time
The number one way to improve your credit score? Paying your bills on time.
Chances are, paying your bills late or not at all is how you ended up with a less than stellar credit score in the first place. Your credit score won’t budge until you are making on-time payments on all of your debts.
Being able to pay your bills on time is the most important factor when it comes to building credit. Making just one late payment can have a dramatic effect on your credit score.
Get caught up on your bills. If you think you can’t make the full payment or can’t make any payment on time, contact your creditor.
The worst thing you can do is bury your head in the sand and pretend your bills don’t exist. Communicating and explaining your circumstances can go a long way with creditors.
You might find that they are willing to hold off on reporting a late payment to the credit bureau or charging a late fee if you are upfront with them.
5. Pay off Your Debt
It’s common sense that the amount of debt you have affects your credit score.
While carrying some debt is good and can help you build credit, having debt that is out of control will tank your score. Focus on paying off your credit cards.
Use your budget to find areas where there is extra money to put towards your balances. Keep your credit usage ratios as low as possible and stay away from the credit card limit.
After you pay off your credit cards, don’t cancel them. Keeping them open improves your score because you will have available credit that is unused.
6. Build Your Credit
Once you have paid off your debts and are caught up on your bills, you should see an increase in your credit score. But, there is more you can do to boost it further.
In general, you want to avoid applying for new credit when you are building your credit score. But, you have to be given credit to prove you can be responsible with it, right?
While you do have to be extra careful when applying for credit if you have a poor credit score, there is a way to get around this. Bad credit credit cards are an excellent way to build your credit without getting in over your head. These credit cards are designed for those looking to improve their credit situation.
More Credit Tips
This article provided a basic overview of how to improve your credit with some of our tip credit tips, but there is more to learn.
Remember that building credit takes time and commitment. It takes longer to build credit than it does to destroy it.
For more help, check out the credit section of our blog.