5 Steps On The Road To Better Credit
If you've decided to read this post, then there's a good chance you're aware of how vital your credit score is to achieving financial stability.
Like many of us, you probably have experienced a financial setback that has hurt your score with one of the 3 major credit rating agencies.
Unfortunately, the credit agencies make overcoming credit obstacles a long and difficult mystery, that never takes into account the real-life circumstances at the time like job loss or life emergency.
Well, we have your back.
Here are some basic tips to keep your credit on stable ground to prepare you to deal with life's uncertainty:
Be sure of where you stand
As the expression goes, those who don’t know their history are doomed to repeat it. How can you move forward if you don’t know where you went wrong in the first place?
Visit www.annualcreditreport.com to check your credit report every 12 months from all 3 credit bureaus (Equifax, Transunion, and Experian) for free. If you notice errors on your report, dispute them. Payment history is a high percentage calculated into your credit score.
MoCaFi Tip: Be sure to review the report from each bureau annually. And if you find a a mistake in one, make sure it doesn’t exist in another.
Pay off any debts you owe
Spreading your debt across your different credit cards is not as helpful as it sounds. When you pay off lingering debts you are showing lenders that they can trust you to have more cash available to repay any future loans you may acquire. When you improve your payment history, you are showing that you are responsible with paying off debts. If that’s not possible immediately, consider paying off more than the minimum. This shows that you have the intention to pay off your debt. Amounts owed is the second largest category of consideration for your credit score.
Don't close out older credit cards
If you had the same credit card since you were 21, that’s great, keep it open! Credit length is another valuable component of your credit score. It shows lenders that you have a long history of managing your money.
- Apply for new credit when you need it, not when you want it
The last thing you need is for your credit score to be lowered even more than it already is. Applying for a new credit card counts as a hard inquiry. Hard inquiries reduce your credit score. Also, it looks bad if you have too many hard inquiries within 2 years of each other.
- Make a plan to pay off future debt payments
By setting a plan to budget your expenses, you are ensuring that you will continue to develop good patterns of payment history which is essential for a good credit score. You also place yourself in a position to ask companies you pay rent to or utility companies for a letter of recommendation if you apply for credit in the future.
MoCaFi Tip: Busy lives can sometimes cause us forget approaching deadlines. Set reminders for yourself so that you don’t miss the deadline at the end of each month and this way you can avoid interest fees on missed payments.
Remember, it takes time to see improvements in your credit score. Patience is key. So don’t expect to have a top credit score overnight or even for a couple of months. However, the long term benefits of improving your credit score are worth the time you put into it.