Easy Tips for Fixing Poor Credit

There are no quick fixes for poor credit histories. However, past mistakes can have less of an impact for people who make a plan to improve their current credit rating. Understanding how lenders and creditors view a person's creditworthiness and how credit management impacts credit scores are keys to improving ratings.

Debt Reduction

You can improve your credit rating simply by not accumulating more debt and reducing the debt you already have. Lenders and creditors consider debt utilization to judge your creditworthiness, which essentially involves looking at how much of your credit lines you use. A debt-utilization ratio that's under 30 percent is usually viewed favorably. For example, if you have a $1,000 credit card limit, you should keep your card balance under $300. You can boost your credit rating quicker by paying as much as you can to reduce the balances on credit cards that are close to their limits to improve your debt-utilization ratio.

Higher Credit Limits

Try to get your credit-card limits raised, but don't use up the additional credit. Higher credit limits also can improve debt-utilization ratios, but this method is not advisable for people who have trouble controlling their spending. Call your card issuers and ask for higher credit limits. They may decline your request, but your debt load will have less of an impact on your credit rating if you are able to get your credit lines increased. However, don't open new accounts. Credit inquiries are usually posted to consumers' credit reports when they apply for new accounts as card issuers examine their credit histories. Too many inquiries can count against you and lower your credit score.

Secured Credit Cards

A secured card can help rebuild credit histories for people whose creditors have closed their accounts or placed them in collections. Secured credit cards require making a deposit into an account that is used by the card issuer to establish the depositor's credit limit. Deposits vary among issuers, but a $500 credit limit could be established with a $500 deposit. Handling a secured account responsibly by paying the bill on time and not exceeding the limit can help establish a positive credit history. The card issuer you select needs to report your account activity to credit bureaus for this method to be effective.