Credit is a vital part to success and ease in your adult life. Having bad credit will result in you having to pay more in interest rates on cars, homes, credit cards, and even personal loans. If your credit score is really low, you’ll likely come across a denial in more cases than not. So what do you need to do to start on the path to improving your credit?
Here are my first 5 Steps to Improve Your Credit
KNOW WHERE YOU STAND
In order to solve the problem, you must first know where you stand. There are several places online that offer a free estimate of where your score is (most popularly www.creditkarma.com). Visit Annualcreditreport.com to pull a report from all three bureaus. Although you wont have a score, you will see the things that are reporting and things you need to address and have possibly disputed.
START TO BUILD YOUR CREDIT HISTORY
While removing bad or inaccurate items off your reports are helpful, they wont necessarily make your score rise. You have to maintain and have all credit accounts in good standing. The easiest and best type of credit to get is a revolving credit or secured credit card. They usually report monthly to all three bureaus and if used correctly will lift your score. The biggest rule of thumb is to keep every balance under 30% of the available limit.
RESEARCH CREDIT OPTIONS AND DON’T JUMP AT FIRST OFFER
Just because you get a card offer, don’t just accept. Most people don’t read the fine print of the card info. Be careful to see what the annual and monthly fees there are with certain cards as those fees add up. Another good piece of advice can come when purchasing a car. Be careful and avoid the smaller car dealerships, that run your credit at multiple different banks and will drag your score down. Its better to get approved from your bank, and then go shopping for a car.
USE CREDIT RESPONSIBLY
As mentioned before, keeping your balances under 30% shows responsibility to the bank that you maintain a balance which ultimately shows you can manage a payment. Another huge credit responsible thing to do is to limit the amount of times your credit is ran. Multiple credit inquires at once shows a bank that you’re struggling or are in dire need of money. You also want to make sure that you aren’t missing any payments of have any payment over 29 days late. Payment history represents 35% of your score, so be sure to keep those payments up to date.
CHIP AWAY AT STUDENT AND PERSONAL LOANS
While making on time payments is probably the most important tip, chipping away at your overall balances will significantly help your score. When going to buy a car or home, loan officers use a debt to income calculator. The simple formula means the higher debt, the less you will get approved for.
I hope that these tips will help you get on track with good credit, and achieve your goal to either buy a home, car, or just improve. If you’re looking to buy a home, please download my Ebook below.