How to Raise Your Credit Score
Statistics reveal that over 30 million people in the U.S. are having problems paying their bills. These financial
hardships and late payments cause lower credit scores, which make it difficult to obtain car or home loans with
reasonable terms. This is because the lower the credit score, the higher the interest rate and the less favorable
the loan terms.
The good news is that it's definitely possible to raise your credit score! The best way to do that is to formulate
an action plan by implementing the following tips:
1. Get a copy of your credit report, so you'll know your current score. Review the report to make
sure all the information (payment history, list of creditors, status of accounts, etc.) is accurate. Dispute any
inaccuracies with your creditors and the credit bureaus and stay on top of your credit score by requesting reports
periodically or by hiring a credit reporting service
that will provide them for you. Continue analyzing the information in your reports and correcting any inaccuracies
as soon as possible.
2. Take steps to rebuild your score. Create a household budget that details the amount of money
coming in and how much you spend on your monthly bills and other expenses. Pay cash as often as you can, rather than
charging purchases. Know the due dates and the amounts of all your bills. Write them on a calendar if you need to, so
you can consistently make your payments on time.
3. Lower your debt-to-income ratio. Pay off as much debt as possible and cut back on unnecessary
spending so you can apply the money you save to paying off your debts. This is especially important when applying for
a home mortgage loan. Review your debts, target
specific balances and make a concerted effort to pay off those debts. Once they're paid, move on to your next targets.
4. Negotiate the best terms possible when applying for loans. If possible, make a larger down
payment to lower your interest rates and the amount and duration of the loan.
5. Don't make large purchases while you're working to improve your credit score. Doing so will
increase your debt-to-income ratio and lower your credit score, undermining all your hard work.
Be prepared; it may take some time for your consistent, on-time payments and debt pay-offs to be reflected in your
credit report. Just keep at it, though, and you should see a consistent rise in your credit score as time goes on.