The higher your credit score, the better your chances of getting loans and credit cards with affordable interest rates.
While your credit score may seem low now, there are moves you can make to improve it in the future. Here they are:
1. Check your free credit report.
As scary as it may be, you have to check your credit once a year to know where you truly stand. You can now do it for free on an annual basis, so excuses about extra costs don’t fly here.
Once you have your free report in hand, you can make the rest of the credit score-boosting moves in this list.
2. Dispute negative information that’s old.
Past mistakes don’t have to ruin your credit forever. Once seven years pass, most negative information such as late payments or collections should disappear.
What can stay on your report past seven years? Things like bankruptcies or tax liens if you live in California. Beyond that, however, file a credit report dispute to remove the old information so you can increase your score.
3. Do a “pay for delete.”
If you’ve recently come into cash and want to put it to good use, you can clean up your credit report by doing a pay for delete.
This involves asking a creditor to delete an account from your report once you’ve paid the past due balance in full.
4. Prioritize which accounts to pay down.
You want to avoid having accounts that are almost at their limit. The more available credit you use, the higher your credit utilization ratio, which makes up 30 percent of your score.
Look for the highest account balances that are closest to their limits. These are the ones you’ll want to pay down first after any past due balances are taken care of. By doing this, you can lower your utilization ratio to better your score.
5. Get some positive history by getting a new card.
Once your accounts are under control, you may want to build some positive credit history from scratch. You can do this by getting a new credit card.
If your credit score prevents you from getting approved, you can opt for a secured credit card or one that exists explicitly for people with bad credit.
Once open, be sure to keep your utilization ratio low (10 percent is great, 30 percent is good) and make payments on time.
6. Write a goodwill letter.
Do you have negative accounts that you paid off? You may get them removed by writing a goodwill letter to the creditor.
A goodwill letter asks the creditor to remove a paid, negative account so you can improve your score. To increase your chances of succeeding here, try writing the message to a specific person within the company.
7. Get help.
If you find your credit situation to be too overwhelming, you could solicit the help of a professional to clear it up for you.
A credit counselor can put together a budget and tell you how to tackle your debt to get it paid down so your score can increase.