Coming back from bad credit can be difficult because people don’t always know where to start. Good or excellent credit may be your goal, but to reach that higher score, there are certain steps you have to take.
If you want to see positive changes in your credit score, there are a number of things that you can do to start on your path to better credit.
Review your credit report
Consumers shouldn’t assume that the information reflected on their credit report is accurate and up-to-date. Reviewing your credit report will allow you to catch mistakes such as the balance on your credit card or the date your last payment was made on your personal loan account.
If you have questions or doubts about the information on your credit report, you can submit a dispute and have an investigation completed to confirm the information. If any information is inaccurate, it could be corrected or removed, and potentially increase your score.
Watch credit utilization
Your credit score is calculated using a variety of information about your finances and your money management skills. Credit utilization accounts for a certain percentage of your credit score and depending on your credit utilization, your score can increase or decrease.
It is recommended that all consumers keep their credit utilization at 30% or less. This means that if your available credit totals $1000, you don’t want to use more than $300 of that available credit. If you go over this percentage, you will likely see a drop in your score, and the only way to change that would be to decrease your credit utilization.
Make on-time payments
Everyone has monthly bills that they are responsible for paying. Whether a payment is on time, missed, or late, creditors can report this activity to the credit bureaus, which in turn will affect your credit score.
Avoid applying for new credit
Applying for a new credit account will result in a hard inquiry on your credit report. Each hard inquiry can take points off your score whether you are approved or denied, so you will see a significant drop if you continue to apply for credit. Before applying for a credit card, personal loan, or another type of credit account, consider your odds of approval and if applying is worth losing the points.
Pay down debt
The amount of money you owe is another piece of information that is used to calculate your credit score. Paying down your debt can be beneficial to you because you will owe your creditors less money, but you will also increase your score. Basically, the more you owe, the lower your score will likely be. But if you work on reducing your debt, you can easily see a bump in your score.
Unfortunately, it doesn’t take much to ruin your credit. And once it is ruined, improving your score can take some time. Making better choices about your finances is key, so as long as you actively work to improve your score and avoid making mistakes such as defaulting on student loans, filing for bankruptcy, or even making a late payment on your auto loan, you can see a positive change in your score.
Need help recovering from poor credit? Contact Credit Absolute today for a free consultation.
