Help Getting My Credit Together

Fixing credit requires more than just paying down credit cards.
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Bad credit can haunt you beyond the fact that you'll have a hard time getting a credit card with anything resembling favorable interest rate and credit limit terms. Some potential employers use your credit report to decide whether or not to make you a job offer. You also can lose the opportunity to get a car loan or a mortgage if your credit scores are low or your credit report has derogatory statements. Using some basic personal finance strategies, you can maintain and repair your credit to help you meet your financial goals.

Review your Credit Reports

The first step in getting your credit together is to get copies of your credit report and find out what is hurting your score. Visit and get a free copy of all three major credit reports: Equifax, Experion and TransUnion. Review the information to make sure it is accurate. If you have negative items on your report that you can’t remove because they are accurate, consider adding comments to your reports to explain these situations. Don’t make unsupported accusations, excuses or otherwise whine. Share extenuating circumstances that a loan office might believe.

Remove Incorrect Information

If your credit report contains incorrect information, visit the website of the reporting agency and follow the steps to have the negative information removed. You might first want to contact the lender who made the negative report to get it removed. If you can’t get them to do this, ask the reporting agency to begin an investigation of the negative item on your report.

Create a Plan

Once you know what is hurting your credit score and have made sure your reports are accurate, create a plan to start rebuilding your credit. This might include paying down the amount of debt you owe, closing certain accounts, or satisfying accounts on which you have defaulted. If you don’t have a personal or household budget, now is the time to make one. Visit the website of the Better Business Bureau for a comprehensive personal budget you can easily create in a spreadsheet program such as Excel. Use your previous years’ bank and credit card statements to see how much you spent last year and how you spent it. You might be shocked to learn how much you have been spending on dining out, personal electronics, clothing, hair and nails and other discretionary items. Add “Debt Reduction” as one of your budget expense categories.

Review Your 401k Match

If you participate in a 401k match, consider reducing the amount you contribute or temporarily suspending contributions to help you reduce your debt and raise your credit score. The more debt you have, the lower your credit score will be, based on how near your credit limit you are. If you contribute $500 per month to your 401k match, your employer gives you $3,000 annually. Using your $3,000 contribution to instead pay down the balance on a 22 percent interest credit card will save you approximately $660 in interest annually. Sacrificing $2,340 in an employer contribution might not seem like a smart financial strategy, but decreasing your debt by $3,000 and raising your credit score might be more important.

Be Careful Shopping Credit

If you apply for low-interest credit cards, potential lenders will pull your credit reports. Each time they do this, your credit score might decrease, since other lenders see you are shopping for more credit. Only apply for credit cards with companies you feel are likely to approve you, and which will let you transfer balances at a low interest rate, or interest-free. Don’t close high-interest cards once you clear them. Your credit score improves when you have long-term accounts and are not close to your credit limit. Keep credit cards open even if you are not using them to get the benefit from having a lower percentage of your total available credit used, and from having long-term accounts.

Get an Installment Account

Your credit score improves if you have installment accounts, such as for a car loan, flat screen TV you bought on time, or other loans on which you make regular monthly payments. If you have paid off your car and student loans and have no installment accounts, consider buying something on installment you can afford to pay each month. Don’t make a large purchase, or you might ding your score.

Make Timely Payments

Missed payments can undo the hard work you’ve done rebuilding your credit. Don’t rely on snail mail to make sure your payments arrive on time. Set up an online account for each of your credit cards and loans, if possible. Pay your bills early to avoid cutting things close and check your payments each month to make sure they arrive on time. If possible, set up automatic payments to make sure you never miss one.

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