Now that you are becoming more mature and are starting to think before whipping out your credit card on status items that you don’t really need and certainly can’t afford, it’s time to start repairing all the credit damage. If you maxed out your cards or missed some payments, your credit score suffered. Don’t despair, though, because you can fix it and improve your credit score.
Get a copy of your credit report. You can get a free copy of your credit report once every year from the three major credit-reporting agencies – TransUnion, Experian and Equifax – by contacting AnnualCreditReport.com. Your score is not on the report (you have to pay extra for that), but you can get a good idea of what led to the low score from reading your report.
Stop using your credit card. Painful as that may be, if you want to improve your credit score, you have to stop the bleeding, so to speak.
Make payments on your credit cards. Pick the card that is maxed out – or close to being maxed out – first. Lenders like to see that you are responsible enough not to use up all your available credit. Ideally, you should only use 30 percent of your available credit, or less.
Pay more than the minimum on the credit card that you want to pay down. If you only pay the minimum, you are paying mostly interest and little principal. Personal finance writer Liz Pulliam Weston at MSN Money notes that your credit score improves dramatically when you pay down credit cards. Once you pay off that card or bring it down to 30 percent utilization, start paying off the rest of your cards. Choose the one with the highest interest rate first.
Deal with the debt collector. If you had any account go to collections because of non-payment, pay it. It is a bad mark on your credit report when an account goes to collections, but it’s even worse if you never pay it, according to Bankrate.com editor Dani Arthur. When you do pay the debt, make sure the creditor reports to the credit bureau that you are paid in full.
Open a savings account at your bank or credit union. That looks good on your credit report because it shows lenders that you have reserves to pay your debts, says Arthur.
Start using your credit cards again once you get your debt until control. Only charge what you can afford, though. If you pay off your credit card in full at the end of each month, you won’t get yourself in debt again, and you are establishing a good credit history.
- Don’t close any of your credit card accounts. Credit history is a factor in your credit score; the longer you have had credit, the better.
- If you were a good customer and only recently began missing payments, you can call and ask if the lender would erase that last late payment. It’s worth a shot.
- Credit reports often contain errors. For example, your report could list a charge-off (meaning you never paid a bill and it went to collections) that wasn’t really yours. If you see any type of error, you can notify the credit bureau in writing, with some sort of proof of your innocence, to get the error fixed.
- Your credit score can improve within 30 days, according to MSN Money, but generally, it takes more time to raise your scores significantly. The amount of time varies on how bad your credit was.
Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.