Your credit score represents a snapshot of your financial health -- a picture that banks and lenders rely on to evaluate you for services such as loans. Few people have perfect credit, but even if you have some blemishes on the report there are several ways to nudge your score upward. It's best to approach credit improvement with a systematic plan that will cover all the outstanding accounts and accomplish the optimum score in the shortest possible time.
Obtain Credit Report
Obtain your credit report from the three main credit bureaus -- Equifax, Experian and TransUnion. Federal law requires these agencies to provide you with an annual free report at your request. Go to their websites and call the 800 numbers they provide for consumer contact. Don't go through third-party vendors; they might subject you to advertising, email spam and unnecessary fees.
Examine Credit Report
Examine the reports carefully, making sure that you are indeed the debtor on the accounts listed and that the outstanding balances are correct. The accounts will be listed as current, late (over periods of 30, 60 or 90 days) or charged-off. The report will also have information on bankruptcies, repossessions and foreclosures. The credit report will include information on how to report and correct any errors.
Manage Credit Cards
Some experts on credit and debt recommend limited use of the cards, paying off any new charges before interest can accrue, to keep up a history of on-time payments and show responsible use of credit. Others recommend not using cards at all unless you need money for a dire emergency and you are unable to borrow the money from another source. They suggest storing your credit cards in a safe place. Don't apply for new credit, as a rejected application also affects your score.
Late Balances
Bring all your old accounts current. Pay late balances, calling the creditors if necessary to make payment arrangements on those past-due amounts. Leave the accounts open as you are paying them down. Rising "available credit" balances on the cards generally improve your credit score.
Communication
If you can't bring your accounts current, contact the creditor and explain the situation. Many credit card companies will lower interest rates temporarily to accommodate customers who are having financial or personal emergencies and who show a good-faith effort to make on-time payments.
Professional Help
Contact a professional financial consultant if you feel you can't get a handle on the debt situation. Use a nonprofit agency that can examine your accounts and your credit report and offer advice on the best approach. Don't bother with debt consolidators. They charge fees for their services and any negligence in paying your creditors on time will end up costing you more than the service is worth.
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