All about your credit score

If you read my last blog, you (hopefully) understand how to read your credit report. Now the question is, how does that information impact your credit score and what do you do with it?

If you haven't checked your credit report, go do it.

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I'll give you the bad news first: As with everything worthwhile, cleaning up a bad record or building a new one takes time. Your credit score will not change overnight. Blemishes on your record take years to disappear Thankfully there are things you can do now to build a more stable credit future for you and your family.

Determine if you need to grow a credit history or fix a bad one. If your credit score is low, it may be that you have not proven yourself as trust worthy to the powers that be yet. If your credit report is completely barren and your score is average, you may want to consider building a credit history. As long as you are responsible, a credit card can be a decent way to start building revolving credit.

If you have a credit history that is not top-notch, here are 10 basic steps you can take now to work towards healing your credit.

Report any errors you find.

You now know the information on your report and how to read it. Read it all the way through and see if anything looks out of place. Any red flags are worth investigating. The three separate agencies will have options to report problems with the report. If you see something that is incorrect report it immediately. Your score may improve depending on what information is incorrect.

Be punctual with your payments.

Paying on time accounts for 35% of your credit score, so this is one of the easiest ways to improve it. Prioritize the payment of bills that show up on your credit report and set up an organized bill-paying system so that you won't miss a payment.

Prioritize your biggest debts.

Focus on paying down credit card balances that are higher than 50% of your credit limit. The amounts you owe make up 30% of your credit score, and borrowers who have used up more of their available credit are considered higher risk.

Pay more than the minimum.

The minimum required monthly payment isn't there to do you any favors it's there to keep you in debt. Pay as much toward your credit card balance as you can each month, and pay down the cards with the highest interest rates first. Lower balances are better for your credit score. Negotiate a lower interest rate.

With a lower interest rate, your pile of existing credit card debt won't grow as much every month, and you'll be able to pay down your balances faster.

Keep your oldest accounts open.

The length of your credit history is 15% of your score, so even after you've paid down your balances, keep your oldest cards open. If you don't have a balance, use these cards to make occasional purchases (then pay the bills in full), so the card company won't close your account for inactivity.

Stop opening new accounts.

Having lots of recent inquiries on your credit report dings your score temporarily. If you're planning to apply for an important loan in the near future, don't apply for anything else.

Pay for everything in cash.

If you stop adding to your existing balances, you'll have an easier time paying them off. If cold, hard cash is too tempting for you, just start paying with your debit card, and be careful not to overdraw your account.

Create a budget.

If you don't know how much you're earning and spending each month, it's easy to spend too much and accumulate debt. Watching where your money goes will make it easier to pay down your debts and improve your credit.

Avoid cash advances.

Cash advances generally start accruing interest from the moment you take them out. They also come with fees and high interest rates. Finally, because of the way most credit card agreements are structured, you won't be considered to have paid off your cash advance until your entire balance is paid off, meaning it will probably take you longer to pay off your debt and get it off your credit report.

Above all, remember patience is a virtue. If you stick with these tips you will slowly, but surely see your credit score rise. With the exception of errors on your report that can be taken off quickly, there are no quick fixes. Don't let impatience stop you from getting what you want. You know have all of the information you need to grow an impressive credit score what will help you get the interest rate and respect you deserve.

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Posted in Financial Services Post Date 02/11/2021


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