Some consumers accept their bad credit and put forth little effort to improve their score. Consequences of bad credit include higher interest rates on loans, credit rejections and even increased insurance premiums. Credit doesn't improve overnight, rather, it's a gradual process. But with effort, consumers can fix their credit score and qualify for the best loan programs.
Payment Habits
Myfico.com explains the importance of timely bill payments, which involves avoiding late or missed payments. Payment habits contribute to 35 percent of credit scoring, which makes this aspect a crucial factor in maintaining a good credit score. Fixing bad payment habits might involve organizing statements as they arrive in the mail. Schedule payment dates in advance by writing due dates on a calender, or paying bills as they arrive can alleviate lateness and help fix credit scores.
Credit Card Balances
Credit cards serve a useful purpose, but unfortunately, some consumers can't control themselves and they acquire excessive debt buying unnecessary items. The amount owed on credit cards and other debts influence credit scores by 30 percent. In conjunction with paying bills on time, fixing credit and maintaining a high score involves controlling debt and keeping balances on credit cards to a minimum. Tips to help get rid of high debts include paying more than the minimum, paying off credit card balances in full each month and saving up for purchases instead of taking out loans or using credit cards.
Keep Accounts Open
The length of credit history also factors into credit scoring. Credit history starts the moment a consumer opens their first account, and this might include opening a credit card account. Older credit card accounts add years to credit history, which has a 15 percent influence on credit ratings. Closing or canceling an older account can reduce the length of one's credit history by years, and this move can hurt their credit rating. Keep accounts open, and occasionally use credit cards to keep the account active. Make a small purchase and then pay off the balance in full to avoid debt.
Dispute Reporting Errors
No one's immune to credit report issues, and creditors and lenders do occasionally make reporting errors. These can include reporting another person's negative information on your personal file (collections, late payments, liens). Identifying errors quickly and getting these issues resolved involves reviewing your credit report periodically. Order a free copy of your report from Annual Credit Report at least once a year, and consider signing up for credit report monitoring to lower your risk of becoming an identity theft victim.
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