10 Simple Tips to Boost Your Credit Score
Bad credit scores can happen to anybody—even to the most conscientious budgeters among us. The good news is that having a bad credit score is not something you have to endure. Credit scores change over time, and there are steps you can take to improve yours. Here are ten of the best things you can do to boost your credit score:
1. Correct Your Report
According to U.S. News, the first and arguably the most important thing you should do to improve your credit score is to correct any mistakes you find when you get your current report. Most accounts have at least a couple of errors in them and fixing them can elevate your score quite a bit.
2. Make Payments on Time
You might already be doing this. If so, great! If not, there is no time like the present to start paying your bills again. Even if you can only afford the minimum due on each account, paying that amount on time every month will help rebuild your credit history and raise your score.
3. Pay More than the Minimum
This is as much for your financial benefit as your credit score. The best minimum payment formula is whatever they are asking for as the minimum payment plus the amount of interest charged to the account plus five to ten extra dollars. If you can pay more than that, great! If not, that’s okay. Paying on time every month, even if it’s just the minimum due, is a huge step in the right direction.
4. DO NOT Close Any Accounts
Do you have a lot of open credit accounts that you never use anymore? Leave those accounts open. Closing credit card accounts can raise your utilization ratio, which will negatively affect your score. Instead of canceling those cards, put them away in a safe place where you won’t use them. It’s actually good to have many different lines of credit open—as long as you’re not making any late payments on them.
5. Challenge Old Accounts
In addition to challenging mistakes, it’s good to challenge old accounts that say you owe them money when you are sure you don’t. Send official letters to each creditor and lending agency and ask that they verify your debt and current amount due. If they do not respond within 30 days, you might be able to get the account expunged from your record!
6. Monitor Your Credit
Sign up for credit monitoring with your bank or another reputable credit tracking agency. This way, you will know immediately if something goes wrong with an account or if new accounts are opened in your name. It’s the easiest way to catch identity thieves and stop them before they can do long-lasting damage to your report and identity.
If you owe a lot of small amounts to a lot of different creditors, you should consider consolidating those small amounts into a single loan or line of credit. Many creditors will offer great balance transfer rates. Consolidation doesn’t erase the debt, but it opens up lines of credit—which is a good thing—and makes it easier for you to pay what you owe. One bill is easier to remember than five or six.
8. Control Your Spending
If you don’t already have a budget for your planned expenses and discretionary spending, now is the time to make one. Often the leading cause of poor credit scores and high debt is failing to track our money correctly. Setting up a budget for spending, saving, and tackling your debt could be the key to getting you back on track.
If you owe a lot of money to credit cards, loans, etc., it might be in your best interest to look at downsizing your lifestyle. Do you really need a large house, or could you be just as happy in a smaller house or an apartment? Does your family really need two cars? Even if you can’t sell your house or automobiles, you can go through your home and sort through your belongings. You’ll likely find a bunch of stuff you forgot you had or never use. Sell these things and use the profit from the sale to put a big dent in your debt.
While bankruptcy is no longer the credit death sentence that it used to be, you should tread carefully here and work with a lawyer who can help you make sure that bankruptcy really will help you. Credit counseling or debt consolidation are other options that you might consider too.
Finally, remember to be patient. A change you make today can take a month or two to show up on your credit report. Start taking small steps now to ensure that within a few months, your score will start to climb.