Over time, and following some unwise money management decisions, you may find that you have bad credit. Bad credit is reflected in a bad credit score, so when you are improving your credit, you are essentially bringing up your credit score. It is worth noting that there is no quick or immediate way to accomplish this. You must be prepared to go through the motions, which may take some time. However, once you do it and get it right, it will be highly unlikely that you will slip back into bad credit again. Here are some steps you can take to get your started on improving your credit.
- Credit Repair
The first thing that you can do is repair your credit score. This would require you to look through your credit report to spot whether there are any errors that have been made. You may be surprised to find that incorrect listings can bring down your credit score.
- Take Out Your Credit Card Balances
When you are using multiple credit cards, you may find that you have some which have small balances. The accumulation of these small balances could hurt your overall credit score. Rather than having a large number of small balances of numerous cards, it would help to pay all of these off. Instead, you should have one or two credit cards that you make use of for all your expenses. If all the small balances are challenging to pay off in one go, you can choose to consolidate them and place them on a balance transfer credit card.
- Bring down your Credit Utilization Rate
Your credit utilization rate communicates how much credit that you have, and how well you are managing it. Bringing this up may be a good option if you find that you are unable to bring down your credit card balances. The key to this helping improve your credit score is to ensure that you do not exceed your credit limit towards the new rate. To get this done, you need to communicate with your creditor and request for the increase.
- Make Timely Bill Payments
Every month, it is likely that you have some bills which need to be paid. These could include major bills like a car payment, or a mortgage where you are unlikely to ever miss a payment due to the consequences of doing so. Credit gets affected when you neglect your smaller bills and do not pay them in time. An excellent way to improve your credit score is to ensure that all of your bills are paid on time, each and every month. This means that you should avoid all situations where you owe any organization, no matter how large or small, outstanding funds. When you need to make a big buy, rather than diving straight into your credit card, it may be wiser to build up the amount that you need over time in a savings account.
- Manage your Behavior
The easiest way to improve your credit is to manage your financial behavior throughout the year, and not just when you are looking for an elevation in your credit. This means that you should make responsible decisions whenever you are faced with any credit issues. Furthermore, you should manage your bills to prevent pile ups or amounts that become too overwhelming for you to pay back on time.
Managing your credit and improving your credit score is a journey with a clear and attainable destination. Once you start making the right decisions, you will notice that over time, you no longer need to put much effort into maintaining an excellent credit score.