So you are sitting there thinking to yourself, “I can’t believe I forgot to pay my credit card bill”. You might think this is just a harmless mistake, but that little error can have a significant impact on your credit score. Once your credit score has suffered from your mistakes, it’s time to do some damage control.
In all reality, it’s not too difficult to make up for bad credit mistakes made in your past. All you need is a little bit of patience and a strong will to improve what you were doing wrong. To help you get back on the right path, I have listed a few steps below on how to improve your credit score.
1. To start things off you need to check and see what your credit score is to see how much improvement you need to make. I suggest using Credit Sesame to do this. Credit Sesame is a 100-percent free personal finance credit and debt management tool. There is no credit card required and no trial period to use this tool. Below is a chart on how the different credit scores stack up. Your goal is to be above 751 because that is when you will get the best rates.
2. After you have checked your credit score to see what damage needs to be fixed, you need to start paying off your balances. You will see some changes in your credit score by paying off installment debt such as student loans or car loans. You will notice the biggest change by paying off the revolving debt you have from credit cards.
3. One thing that a lot of people don’t realize is that racking up large charges on your credit card can actually be a bad thing. Try and keep your balance at all times to below 30% of your credit limit. Credit card companies usually report the statement balance to the credit agencies, so it doesn’t matter if you pay your bill off each month in full if you are carrying a balance into your statement date. What I like to do is set a reminder a couple of days before the end of my statement period and I pay down my balance. That way the credit card company is reporting a $0 balance.
4. Using an old credit card is a great way to bring life to your older lines of credit. Credit agencies love to see a long credit history. If you have an old credit card sitting around your house make sure you use it at least once or twice a month. If it sits inactive than the card company could decide they want to cancel it. Having an older card canceled is the last thing you want to have happen because it will drop the average age of your available credit.
If you follow these simple steps you will be well on your way to improving your credit score and receiving better rates on car and home loans. Just in case you missed it make sure you check out my article, How is my Credit Limit Determined?
I would also suggest writing to the credit bureaus if you have any late items within the past two years. It has always worked for me. I had to write into Transunion twice to get a late item off my credit report but other than that, it has worked like a charm.