5 Measures You Can Take Now to Help Your Credit
Achieving your financial and other life goals, like owning a house, acquiring a car, expanding your business, or even furthering your studies in college, are highly dependent on having a good credit score. Lenders use your credit score to predict your creditworthiness and how responsible you are with using your credit cards. They also use the score to determine the terms of lending you a loan or offering you other credit products, if they decide to do so. Some of the things that influence your credit score include your credit history, your amount of debt relative to your credit limit, and your credit mix, among other factors.
The following are some things that you can do within a short period of time to help improve your credit:
1. Pay off any overdue payment
Since your payment history contributes to a significant portion of your credit score—35%—it is critical to pay any account that is past its due date. The more days that pass after your payment’s due date, the more damage is being done to your credit rating. You should talk with your lender or credit card issuer to sort out any overdue accounts before they are shared with the credit bureaus. Your card provider may even be willing to re-age your accounts if you approach them, so that your credit report would show timely payments throughout.
2. Seek professional assistance
Your debt burden may be too overwhelming to the extent that you cannot handle it. In this case, you need to look for professional help, for example from a credit counseling agency or from a financial analyst, to help you see how you can cut your expenses and repay some loans. Additionally, you can engage a professional in improving your credit, to work with you on improving your score by using tradelines.
3. Stop further credit card purchases
Consider avoiding any more credit card purchases, as they make your credit utilization go up. Credit utilization is the ratio of the amount you owe on a card to its credit limit. For example, if your card has a limit of $3000, and the outstanding balance is $2000, the credit utilization is 0.67. For the same limit, but with a balance of $1000, the credit utilization is 0.33. High credit utilization hurts your credit score. Avoid further purchases with your card to stop raising the credit utilization, and instead, pay with cash or even minimize your cash purchases to only what is necessary, and use the rest of your money to pay off your card balance.
4. Check your credit report
Get a free copy of your credit report from the major credit bureaus and go through it to check for any errors. If you spot an anomaly, like late payments reported by mistake, get in touch with your lender and the credit bureau to rectify it. Though the effect may not be instantaneous, the corrections will be visible on subsequent reports, and you will have started to correct the wrongs. If need be, pay a fee for the report, since the benefit of correcting any error that could be hurting your score or using the report to strategize how to improve your score far outweighs the cost.
5. Put any new credit card application on hold
Hard inquiries on your credit score, necessitated by the application of a new credit card, will hurt your score, so avoid applying for a new card when working on boosting your score.
The bottom line
You have many redemptive measures you can do right now to help your credit, like paying overdue debts and reducing the usage of your credit card, so make wise decisions to help improve your score.