Are you determined to improve your credit? Congratulations! You have made a very wise decision indeed.
However, achieving better credit does not happen overnight. It takes responsibility and consistency to make real changes to your credit.
But, if you’re able and willing to follow these five simple strategies then your credit scores can’t help but improve.
1. Check your credit reports for errors.
Credit reporting errors happen. In fact, the Federal Trade Commission released a study in 2013 that estimated that 21% of consumers have errors on their credit reports.
While you do have the right to expect and demand accurate credit reporting, the truth is that it’s ultimately up to make sure that your credit reports are error-free. No one else is going to monitor your credit reports for you, and you need to develop the habit of checking all 3 of your credit reports routinely.
If you do discover errors when you check your reports you have the right to dispute those errors with the credit reporting agencies directly, and even with your creditors or debt collectors.
[inline-ad]You can dispute the errors completely on your own or you can hire someone to do it for you. Either way, if you discover an error and successfully dispute the account (resulting in removal from your credit reports) your could significantly improve.
2. Take a long, hard look at your credit card balances.
Your credit card balances are very influential over your credit scores. It’s simply not enough to pay your credit card accounts on time every month. If you want to earn great credit then you have to pay attention to your credit card balances, or more specifically the relationship between your credit card balances and your credit card limits.
That relationship, known in the credit world as your revolving utilization ratio, is actually the key factor considered by FICO and VantageScore.
When your credit card balances rise, your credit scores will take a hit. That’s why carrying credit card balances from month to month not only wastes your money on interest fees, it is also a very unwise choice for your credit. Pay down your credit cards to reduce your revolving utilization ratio and you are practically guaranteed to see some positive movement in your credit scores.
3. Raise your credit limits to raise your credit scores.
Reducing your revolving utilization ratio is the fastest and most effective way that you can raise your credit scores. If you can’t afford to pay off your credit cards right now, another tactic is to increase the credit limits on your credit cards. When the available credit on cards increase, your revolving utilization ratio will fall, assuming you don’t take on more credit card debt.
Since credit scoring models reward you as your revolving utilization ratio goes down, then asking for a credit limit increase can be a great way to potentially earn you an easy credit score bump.
4. Consider consolidation.
If you can pay off your credit cards in full, then you should absolutely do so. However, it’s not uncommon to become so overwhelmed in credit card debt that simply paying it off with disposable income is not realistic.
If you find yourself in this unfortunate situation then credit card consolidation may still be a solution, especially if you consolidate with a personal loan.
Personal loans are installment debt, which means you make a fixed payment for a fixed period of time. Installment debt is not as influential on your credit scores as credit card debt since it is not calculated into your revolving utilization ratio. Therefore, if you use a personal loan to pay off all your outstanding credit card debt then your revolving utilization ratio would fall to 0%, which is a great move for your credit scores because they’ll likely skyrocket.
5. Ask a loved one for a favor.
Credit scoring models are also concerned with the age of the accounts on your credit reports and the older the better. If you do not have enough established credit, or if the established credit you have is not very old, you can consider asking a loved one for a favor.
A close friend of family member might be willing to consider adding you as an authorized user to one of their existing credit card accounts. If you are added as an authorized user to an older account then you might just see an increase in the average age of your accounts and, perhaps, an increase in your credit scores as well.
