Staying Ahead of the Game: How to Improve Your Credit Before you are Too Far Gone
A good credit score is your key to the best interest rates on loans, and could play a role in your insurance rates and whether you get an apartment or a job. That’s why it’s extremely important to keep it high. If you credit score has fallen, it is important that you don’t give up and let things go too far. If you have poor credit and want to improve your score before it spirals out of control, take a look at the following suggestions for credit improvement:
Catch Up on Late Payments
More than one-third of your credit score is based on your payment history, so if you have late payments or amounts that are past due, it’s going to have a significant negative effect on your score. To improve your credit score, bring all past-due accounts current and continue making all your debt payments on time. Those past-due payments should be your top priority in order to rebuild your credit.
Pay Down Debt to Keep Your Debt Ratio Low
The second-most important factor in your credit score is the amounts you owe. If you owe a lot of money on your credit cards, it is likely to lower your score, especially if your ratio of debt to available credit is low. For example, if you have two credit cards with a $5,000 total credit limit and your combined balance on the card is $3,000, you debt-to-available-credit ratio is 60 percent, which is way too high. By paying down that debt to $1,500 or even lower, it will bring your debt down to a more acceptable level and boost your credit score.
Don’t Apply for Accounts You Don’t Need
If a low debt ratio is a good thing, you might think boosting your available credit by apply for extra credit cards is a good thing, but it isn’t. Applying for new cards leads to inquiries on your credit report, which temporarily lowers your score if you have several of them in a short period of time. Those inquiries also can signal to potential creditors that you may be intending to take on new debt.
Don’t Close Accounts
Closing credit accounts won’t eliminate negative information, and closing accounts with a positive background could negatively affect your length of credit history, which makes up 15 percent of your credit score. According to professionals who specialize in credit counselling in Manitoba at Keith G. Collins Ltd., closing accounts also lowers your available credit, which could raise your debt ratio and lower your score.
There is no quick way to fix your credit score, and if you have negative items on your credit report, it can take years for them to disappear. However, acting responsibly and following these tips will help you improve your history before things get too bad.
