How to Improve Your Credit Rating

Getting back on track

It’s not very hard to find yourself with a less than average credit rating these days. With people on the go all of the time, it’s understandable that they might miss a credit card due date and make a late payment. It can happen to even the most attentive and creditworthy people. In the worst case scenario, somebody could have gotten a hold of some of your vital information and could be racking up credit cards in your name. If you do happen to end up with a bad credit score, there are ways to help sort out the mess and gradually improve your credit rating.

The first thing you should do is get a copy of your credit rating to make sure that it’s accurate. If you notice something wrong on your report, make sure you try to correct it right away.

To correct an error on a credit report, send a separate letter to each credit bureau where a mistake is found. Explain the situation and send them a copy of the report and highlight the mistakes. The errors will then be investigated by the bureau by contacting the creditor who supplied the original information. If the creditor admits to an error, the bureau will remove it from your credit report. If no errors are admitted to, then you can file a statement in your report that tells your side of the story. Any future reports to creditors must then include this statement or a summary of it.

If you’re trying to improve your credit, it’s not a good idea to apply for too many credit cards or loans over a short time frame as numerous inquiries can have a negative impact on your credit rating. It’s also a good idea to keep your current credit cards well below the credit limit they offer. If you reach about 75 percent of the maximum limit, it doesn’t look good to a creditor.

If you have any inactive or old accounts you never use, you should close them as credit card companies and banks will consider them to be active accounts. The fewer accounts you have open, the lower a risk you are.

If you show that you can make regular payments on time, it will help your rating. Opening a gas station or department store credit card can help you out here if you use the card regularly and pay the bills in full on time. It will also help if you can pay the balances of any current credit cards. If you have money sitting in a bank account, it may be more useful to you if it’s used to pay your bills off. Most of all, make sure you use your credit cards responsibly by practicing good spending habits and knowing when and where to use them.

If you’re having trouble paying your bills, it’s recommended that you contact your creditors to explain the situation. They may be able to work out a more manageable payment plan for you. The last thing you want is to have the creditor turn your account over to a debt collection agency. You could also try consolidating all of your debts into one more manageable loan.

If you find yourself in a situation where none of these options are possible, you should discuss your situation with a financial advisor to come up with a plan for managing your debt and improving your credit rating.