A bad credit score can mean a borrower has to pay higher interest rates or may not be able to obtain credit at all. By taking the appropriate steps, you can begin to repair your credit score and be back in good standing in less time than you imagined. Changing habits and taking the initiative to regain control of your finances will raise your credit score significantly over time.
Check Your Credit Reports
The first step in beginning to rebuild a good credit score is to obtain a copy of your credit report. Credit file disclosures from the three nationwide credit reporting companies are free once every 12 months and can be requested through a website called annualcreditreport.com. This is the only authorized online source to obtain your free credit reports.
Look over your reports carefully and check for errors. If there are current accounts listed as delinquent, charges that you are unfamiliar with, accounts that do not appear to be yours, or any other information that is not correct, contact the companies listed and get the report corrected. It is unfair to be judged for credit problems that are not your responsibility, but it isn't uncommon to find errors on your report and they will not go away if you do not pursue it.
Pay Bills On Time
Pay all bills by the due date. This is one of the most effective ways to raise your credit score, according to the Federal Reserve Board website. Set up automatic payments with your bank if you have difficulty keeping up with due dates. You may even talk to your creditors and ask for a change of due date that will make it easier to remember. It is also important not to overdraw your bank accounts. Keep enough money in the bank to cover the bills.
Avoid Scams
There are countless companies out there who are looking to prey on those in financial trouble. Credit repair scams are a huge problem for people who feel they have nowhere else to turn. These companies offer seemingly easy ways to get out of debt; however, it is best to avoid these scams because they will often do as much damage to your credit score as bankruptcy. In addition, they are not working for free, so you are really just spending more money. Helping yourself out of debt is the best way to handle the situation, according to the Federal Reserve Board website.
Pay Off Debt or Keep Low Balances
If you can pay off a debt, do it. Carrying low balances on credit accounts or paying them off entirely will do wonders for your credit score. Credit scores are determined partially by comparing your available credit to how much outstanding debt you are carrying. If you have a high credit limit but your balance is close to the limit, your credit score will be negatively affected. Keeping accounts open and maintaining a very low or zero balance is likely to improve your score.
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