A bad credit report can impact your life in major ways. You will probably have difficulty obtaining new credit, you may have issues renting a home and you may even have problems getting a new job. The good news is that you have the power to turn your credit report around by cleaning up your act and focusing on the factors that impact your credit score calculation.
Consistently Make Timely Payments
The biggest chunk of your credit score calculation depends on whether you make on-time bill payments. If you haven't been making timely payments, set your accounts up with automatic payments to take care of this all-important task. If you have been good about making timely payments, keep doing so and make sure you don't fall behind. According to Ken Lin, CEO of CreditKarma.com, borrowers who pay their bills on time each month keep an average score of 706, whereas those who pay on time 99 percent of the time only have an average score of 658 points.
Pay Down Debt
Roughly a third of your credit score is dedicated to how much debt you have, so paying down your debt is important to getting an optimal score. The Better Business Bureau recommends keeping balances of no more than 25 percent of your credit limit on your credit cards. It's important to remember that creditors don't just report your balances at the end of the month -- they may report at any given time. Therefore, it's unwise to spend up to the limit, thinking that you'll be safe if you pay off the card at the end of the month. Keeping low balances demonstrates that you're a responsible borrower.
Use an Old Card
The length of your credit history accounts for 15 percent of your credit score, but if you have an old card and you're never using it, it's likely that the credit card company has stopped reporting your account to the credit bureaus. That means it's not being taken into account as part of your credit score calculation. To ensure that your oldest accounts are being reported, use each of your cards once every six months or so, then pay off the balance to keep your debt utilization under control.
Report Errors
One of the fastest ways to improve your credit report is to report any discrepancies to both the consumer reporting agency and your creditor. The Federal Trade Commission recommends reporting the error in writing and providing copies of any documentation you may have on hand (don't send originals). The consumer reporting agencies usually review the dispute within 30 days, then send any relevant information to the three major credit reporting agencies -- Experian, Equifax and TransUnion.
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