Now more than ever, having a solid credit score is important. Establishing cell phone contracts and other must-have services often requires a credit check. If your score is less than stellar, consider these 5 tips for reaching the score you’ve always wanted.
1. Check Out Your Credit Report
You already know what you want to achieve – a credit score that will enable you to reap all the benefits a good score can provide, like super low financing and payment periods with zero interest required. But to reach this goal you’ve got to first know where you’re starting. So go ahead and get a copy of your latest credit report. Knowing what you’ll need to do to earn the score you want is truly important.
Once your score is up to par, you’ll be able to look back at how far you’ve come. But keep the good habits going: consider signing up for monthly credit monitoring. That way, you’ll be alerted to any potentially fraudulent activity on your credit report going forward, and you’ll always be in the know as to where your credit stands.
2. Get Your Payments Up to Date
Bills are the hard part, and that goes for everyone. But outstanding debts with late payments can put a serious dent in your credit score. So it is crucial that you get all accounts on your credit report to show as paid on time.
Even if you have limited funds, you can still get caught up. Most credit card and utility companies will work with you to make arrangements for minimum payments that are adjusted to reflect what you can afford. Any company would rather you pay your debt consistently, even if it takes longer. And you may be able to consolidate your debt, which would make payments even easier. The act of consolidating debt involves consolidating multiple debts into a single payment, typically Smart Credit’s monitoring service bills with high-interest rates
3. Stop Applying for Credit
Every time you apply for new credit or attempt to increase a credit limit when that might require a credit check, it will be noted on your credit report. These all count as inquiries, and when frequent inquiries occur, your credit score drops and creditors are less likely to approve new requests. That’s because it presents a picture to the credit companies that you may be low on funds and could possibly be unable to repay any new credit given.
2-3 inquiries per year are fine, but you definitely don’t want to give the impression that you are constantly looking for new sources of credit.
4. Keep Your Balances Low
The secret to good credit doesn’t mean keeping a zero balance on all of your credit cards – that doesn’t do much of anything at all. Creditors want to see that you can use credit and use it wisely. Maxed-out credit cards and purchases over the limit can both bring down your score, and quickly.
What you want to show is that you can responsibly use just a portion of the credit you’ve been awarded and that you can make reliable payments each and every month. That’s really all it boils down to.
5. Work Toward Paying Down Old Debts
Once you’ve got these four things under control, it’s time to tackle the bigger problems: outstanding debts. Student loans, car loans, old credit accounts – these lurk on your credit report, showing exactly how much you’ve borrowed and exactly how much you’ve repaid. If the old debts on your credit report are not eligible for consolidation, see if any of the credit holders are willing to negotiate a settlement with you. Sometimes, if you’re going to pay upfront, a company will consider reducing the total owed on your debt.
A great credit score is something you can achieve, so get started with these tips today and take control of your finances.