By: Jennifer L. Lopez Debt.com Financial Fitness Planner
You are not just a number. But when it comes to the world of credit worthiness, it can all come down to one number—your credit score. When financial distress befalls you, it can take years to improve your credit score again. Particularly if a lien, bankruptcy or foreclosure is involved, the results of such can stay on your credit report for as long as 10 years. Having strikes on your credit report can make obtaining credit, like a home mortgage, auto loan, or credit card, very difficult, very costly, or even impossible. Though it can be a long road to improving your credit score, there are some practical steps that you can take to improve your credit score sooner rather than later.
- Get in the know—Obtain a copy of your credit report. Every consumer is entitled to one free copy per year from each of the 3 major credit bureaus when you request it at AnnualCreditReport.com . Have you been recently turned down for credit based on a credit report? You are also entitled to a free copy from the credit bureau that the decision was based off of.
- What’s the score?—It is vital to know what is on your credit report, but since the compiled credit score is often used for quick credit decision making, you should know where you stand. CreditKarma.com will provide you with continuous, totally free credit score monitoring, in addition to your auto insurance worthiness rating.
- Dispute the issue—Now that you have your credit report, go through it line by line. Mark any accounts that you do not recognize or information that you feel is inaccurate. Use the attached mail-in form or online dispute form to launch an investigation. Include any applicable information or paperwork that would be helpful in clearing up the issue.
- Purge—While you are reviewing your credit report, make sure that there are not any negative accounts that have overstayed their welcome. You will often see a date that indicates how long an account will remain on your record. If the date has passed or has almost arrived, add that to your dispute. Do not remove accounts in good standing, as that can adversely affect your score. If a credit bureau cannot provide updated information on an account, they may remove it altogether, which can often be helpful to your score.
- Make a statement—Even after disputing and removing accounts, it is very possible that negative accounts still remain. You have the option to add a 100-word consumer statement to your credit report. Though it will not affect your credit score, it could prove helpful if a lender, potential employer, or potential landlord pulls your credit report. Use the space to explain questionable marks against you. Consider this your opportunity to explain.
- Emphasize the positives—Have you ever noticed that accounts that you miss a payment on or are delayed in paying always seem to wind up on your credit report, yet the utilities and other bills that you pay on time on a regular basis are mysteriously missing? Some vendors only report problem accounts to the credit bureaus, but it does not hurt to ask if your positive account can be reported as well. Additional accounts in good standing should raise your credit score.
- Be on time—Paying your bills on time is the primary way to improve your credit score. A long-term history of faithfully paying your obligations will slowly raise your standing. Likewise, if you miss a month, it will be reflected, so be mindful of the potential lasting effects of even one slip-up. For credit cards, even if you are low on cash, try to pay at least the minimum by the due date to avoid damage to your record.
- Take an application vacation—Allowing a potential creditor check your credit report, known as a “hard” credit inquiry, can actually pull down your credit score. So, with that in mind, sometimes the best action is none at all. Especially if you notice a lot of inquiries on your record that are impacting your score, it may be best to hold off on applying for new credit for awhile. Too many inquiries can adversely affect your score, and cause potential creditors to give pause if they feel you may be getting in over your head.
- Secure a credit card—Even if your credit is not good enough to obtain a credit card or you do not trust yourself with one, there is an easy and fairly quick way to re-establish your credit—get a secured credit card. A secured credit card is essentially a pre-paid card—you put down cash collateral, and then you are able to spend it. The benefit is that normally these secured credit cards will show up on your credit report as a regular credit card, providing an established payment history. Before you sign up for a secured credit card, check to make sure that they report to all 3 credit bureaus, and that there are no abnormal fees or obligations.
Rebounding from an unfavorable credit situation is easier said than done and will take time, but by following tips like these, you can jumpstart your credit recovery. If you have to be just another number, you can make it a positive one by applying a little extra TLC to your credit report.