A bad credit score can affect your ability to get more credit, rent an apartment or even get certain types of jobs. But having bad credit doesn't have to be a permanent situation. You can improve your credit over time by taking certain steps to use credit responsibly.
Check Your Credit Report Regularly
You are entitled to one free credit report every year from each credit reporting agency. Although free reports don't include a score, you can still see everything else on your report, such as balances and delinquencies. Credit report inaccuracies can lower your credit score. For example, if you know you've paid off a loan but your credit report shows a balance, that balance can reduce your score by affecting your balance to limit ratio. Checking your credit report every year will help you spot inaccuracies. You can report inaccuracies to the credit reporting agency, which will investigate and correct the information if required. Small inaccuracies can add up.
Make Payments on Time
Making regular, on-time payments every month increases your credit score. If you've been behind before and your score takes a hit as a result, you can build it back up by resuming regular payments and catching up on past-due balances.
Do Not Repeatedly Apply for New Credit
Every time you apply for a new credit card or loan, the application counts against you on your credit score. Applying for a lot of loans and credit cards within a short period can make you look irresponsible. If you apply for a credit card and are denied, don't just keep trying until you get one. Back down and wait a few months to a year before trying again. Additionally, having a large number of credit cards and personal loans can hurt your credit. If your credit is diversified and you have some credit cards and some installment loans, such as car loans or mortgages, your score will be higher -- but a high number of credit cards can show irresponsibility.
Reduce Your Balances
Having high balances on your credit cards can negatively affect your credit score, especially if your balances are at or near your credit limits. A lower debt-to-limit ratio is helpful. Don't max out your credit cards, and try to pay more than the minimum payments to reduce the balances, even if you can only do it one card at a time.
Get More Credit if Conditions are Right
If you have a short credit history or no credit history, you can build a credit history by obtaining a reasonable amount of debt and using it responsibly by repaying it on time every month and not overspending. Over time, your score will increase and your credit outlook will improve. If you already have a lot of debt or have been in debt for a long time, getting more debt will not help you.
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