Cleaning Up My Credit Rating

Cleaning up your credit rating takes work and patience. Bad habits such as late payments and overspending contribute to a poor rating, and it can take several months or years to undo the damage. But bad credit doesn't have to last forever; and with effort, you can realistically improve a low rating in six to 12 months.

Payment History

Your payment history significantly impacts your credit rating, and improving a bad rating involves paying your bills on time. Every late payment or missed payment reduces your rating; and in some instances, credit card companies may increase your interest rate, which results in higher minimum payments. Recognize the importance of timely payments and pay your creditors on or before the due date. If you are unable to pay a creditor due to financial hardships, contact the creditor immediately and ask to set up a payment arrangement.

Reduce Credit Card Debt

Excessive credit card debt or a high debt-to-income ratio damages your credit rating, even if you pay your bills each month. Lenders reviewing your application for an auto loan or mortgage will take your debts into consideration, and they may deny your request due to a high debt-to-income ratio. Rather than accept excessive debt, resolve to reduce your debts or become debt-free. You can't achieve this overnight. But with determination and a realistic strategy, you can pay down your debts and clean up your credit rating. Cut back on spending and use your disposable income to get out of debt. This may involve forgoing shopping, dining out, vacations and other extras. If feasible, get a second job to bring in additional income.

Dispute Errors

Along with regular payments and lowering debts, annually reviewing your free credit report can have a positive impact on your credit rating. Click on the Annualcreditreport.com link in the References section below and request a copy of your personal report. Creditors make mistakes, and they may erroneously include negative information on your report. These negative remarks can reduce your FICO score and make lenders question your credit habits. Get a copy of your report once or twice a year, and dispute unfamiliar accounts and other mistakes.