Develop a plan for improving your credit. Rarely will one trick solve your credit problem. However, tackling your credit woes from different angles and taking a comprehensive approach to resolving your credit problem can pay off. Bad credit has many different causes -- some with quick fixes, others that only time can repair. Your credit score may be negatively affected by your payment history, age and mix of credit, debt level and an excessive number of credit inquiries. Customize an action plan that is specific to your credit problem and you will find yourself back on track, replacing your bad credit with good credit.
Monitor Your Credit Report
You need to know the information being reported on your credit report. Your credit report is always changing and it is important that you know when something negative is added to your report. Review your credit report for inaccurate information such as incorrectly reported collection accounts, inaccurate payment history or inaccurate balances. You can request a free copy of your credit report annually. Request your report for free from Annualcreditreport.com, by calling 1-877-322-8228 or by mail: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Consider subscribing to a credit monitoring service so you can check your credit monthly and use the service's analysis tools.
Dispute Inaccurate Information
Once you know the negative information contained in your credit report, you can dispute anything that is inaccurate or questionable. The credit reporting agencies are required to verify the accuracy of the information they are reporting within 30 days or remove the information. You can dispute anything on your report, including credit inquiries. Sometimes negative information will be removed from your report simply because the credit reporting agency could not verify the information in a timely manner. As negative information is removed from your report, your credit score will be recalculated and should improve.
Improve Your Debt to Credit Limit Ratio
Find out how much you owe on your credit accounts. Maintain a balance on your credit accounts of less than 30 percent of the credit limit. This means that if your credit limit on a credit card is $5,000, work diligently to pay it down to less than $1,500. You could also ask the credit card company to increase your credit limit. That will immediately gain you a few points at least. If you pay off a card or decide you no longer will use a credit line, avoid closing the account. This will report that you have available credit that you are not using, improving your balance to credit limit ratio.
Establish a Good Payment History
You can begin establishing a good payment history by paying your bills on time from now on. This is the best way to improve your credit score. If you do not have any payment history, consider applying for a credit card. If you cannot get approved for a traditional credit card, you can apply for a secured credit card which should not require a credit check. Be sure the credit card reports to the three major credit reporting agencies: Experian, Equifax and TransUnion. Payment history accounts for approximately 35 percent of your credit score.
Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.