Your credit score can affect your entire life. But there are some things you can do to improve it. If you are living in our apartments in Blacksburg, VA, and need some help improving your credit score, here are some tips that can help.
1. Find and dispute mistakes on your credit report
First things first: Order a free copy of your credit reports from AnnualCreditReport.com. By law, the Big Three (Experian, Equifax, and TransUnion) have to give you one free copy a year. Order one from each every four months, then dispute any errors – they’re not uncommon. A study by the Policy and Economic Research Council found errors in 19% percent of the credit reports they looked at.
2. Pay down credit card balances
The amount you owe makes up 30 percent of your credit score. In the video, Stacy suggests paying down your credit card balances to no more than 30 percent of your available credit limit. For example, if you have a $1,000 credit limit, don’t carry a balance higher than $300.
3. Raise your credit limit
If you can’t pay down your balances, ask your credit card company to raise your credit limit – and don’t put any more debt on the card. By upping your total available credit, you’ll lower your credit-to-debt ratio and increase your score.
4. Don’t close accounts
The length of credit history makes up 15% of your credit score. Closing old accounts will shorten your credit history and hurt your score. If the card has no annual fee, keep it open.
5. Don’t apply for credit before a big purchase
Don’t apply for a new credit card or loan six months to a year before you plan to make a big purchase – like buying a house.
6. Pay on time
If you have past due accounts on your credit report, pay them now and then keep your accounts current – and that includes everything, not just credit cards. Cell phone bills, utility payments, and even rent can appear on your credit report. Don’t be late.
7. Ask for a good will adjustment
If you are running late, ask your creditor for a good will adjustment. This means a creditor removes one or two late payments from your credit report. To get one, you’ll need a good history with the company. Most won’t do it if you’re habitually late. You’ll also need to ask – no creditor will offer to forgive a late payment.
8. Try to remove black marks
Some negative marks (like a foreclosure or tax lien) aren’t going away, but collectors and lenders may remove charge-offs or collection accounts if you negotiate with them. Before you pay anything, write a letter to the creditor and ask to have the account removed or marked as “paid as agreed” in exchange for your payment. After the creditor agrees (in writing) to remove the negative mark, pay the balance.
9. Use an old credit card
Credit card companies often stop reporting your account if you don’t use the card for several months or years. Dust off the card, use it to make a few small purchases, and the creditor will start reporting again. Doing so increases your available credit limit and your credit history length, since the old card is showing active again.
10. Apply for different types of credit
I’m a renter with two paid-on-time credit cards and no other loans. I should have great credit, right? Yes and no. While my credit score is fine, I’ve been denied credit twice because I don’t have a good credit mix. The types of credit you have makes up 10 percent of your score, and lenders like to see that you can handle loans that are both revolving (credit cards, for example) and installment (a mortgage or car loan).
If you only have a credit card, add a small personal loan to the mix – perhaps a signature loan from a credit union. Paid on time, blended credit boosts your score.
11. Shop for credit fast
When you shop for new loans or credit cards, do it quickly. When the credit bureaus see several credit inquiries for an auto loan within 30 days, for example, they assume you’re comparison-shopping and lump all of the inquiries into one. Inquires make up 10% of your credit score – the fewer the better.
12. Open a secured card
If you can’t qualify for a traditional credit card, open a secured one. Secured credit cards are backed by money you put into a deposit account, so they’re low risk to the lender and easier to get. You’ll boost your credit score by paying on time each month, and many creditors will allow you to later graduate to an unsecured card. And you’ll get your full deposit back.
13. Don’t consolidate your credit
That’s bad advice. By closing cards, you shorten your credit history. And consolidating debt doesn’t remove it. It only shuffles it around.
But there’s an exception to this rule: If you’re paying ridiculously high interest on one credit card, transferring the balance to a lower-interest card will save you money. But keep both accounts open if there’s no annual fee.
14. Rehab your student loans
Defaulted student loans hurt your credit score. If you haven’t been paying your student loan on time, contact the lender. Federal student loans are eligible for payment plans. For example, the Income-Based Repayment Plan lets you pay off your loan in monthly installments based on your income level.
15. Make sure every company reports
If you are trying to boost your credit score, contact every company you pay monthly – including cell phone provider, cable company, and electric company – and ask them to report your payments to the credit bureaus. Most do, you will see a small boost in your scores within 60 days.
Utility and service providers usually only report nonpayment, but they’ll sometimes report the good stuff too – if you ask for it.
16. Find out when your balance is reported
Credit card companies have a “balance date,” or the date they report your balance to the credit bureaus. Not surprisingly, that date is rarely the same day as the date your payment is due. Thus you can pay your balance off in full every month, but your credit report could still reflect a balance. Contact your creditors, ask them when the balance date is, and pay your bill before it.
17. Don’t co-sign
When you co-sign a loan, you agree to take on the debt if the borrower stops paying. Don’t risk financial damage for someone else’s gain.
18. Start early and wait
No matter what any credit repair service tells you, it takes time to turn a blemished credit history around. While some commercial lenders use rapid re-scoring programs, you typically won’t start to see improvements for at least a month, often several. If you’re planning on making a big purchase, start working on your credit six months to a year in advance.