I am Having a Difficult Time Establishing a Good Credit Rating

Your credit rating is an asset that can sustain damage if you run into financial trouble. Late or missed payments, multiple maxed-out accounts, and debts that are charged off or placed with collection agencies are some common negative factors, according to MyFICO, a credit-scoring website. Establishing a good credit rating after going through problems is a challenge, but it is possible if you concentrate on certain actions.

Factors

Establishing a good credit rating requires you to focus on the factors that have the biggest effect on your credit score. The MyFICO site identifies them as your bill payment history and the amount of money you owe on loans and credit cards. The length of time you have used credit, your new accounts and your mix of account types all count to a lesser extent. You get the most benefit from on-time payments and lowering your overall debt.

Payment Problems

Making payments after their required deadlines keeps you from establishing good credit. If you are mailing the money late, switch to electronic payments if possible. Your bank may allow you to specify a date and amount for a repetitive payment that goes out automatically, eliminating lateness. Try to send at least the minimum amount if you are having trouble coming up with the money. Ask your credit card issuer to change your payment date if it does not coincide well with your paychecks. Holden Lewis of the Bankrate.com financial website explains that many creditors will to do this upon request.

Balance Reduction

Your credit card balances go down very slowly if you can only afford the minimum payments. Channel any extra money into balance reduction if you can free up funds through creating a strict budget. The Motley Fool website recommends putting the extra money on your highest interest rate account. Most of the minimum goes toward the interest, so the extra funds help reduce the actual balance.

Credit Report Corrections

Your credit rating may get a quick boost if you find and dispute mistakes on your credit reports. The Federal Trade Commission advises that the Equifax, Experian and TransUnion credit reporting bureaus run a website, AnnualCreditReport.com, to provide no-cost, no-obligation reports. The Fair Credit Reporting Act requires them to give consumers these reports once every 12 months. The bureaus also have dispute forms on their websites in case you find erroneous negative entries. They have 30 days to process your complaint and attempt to verify the information. The law forces them to erase the negative entry if the verification is unsuccessful.