Getting your credit together is one way to prove that you're able to handle your finances and debt responsibly. Several contributing factors play a role in bad credit. Often, bad credit results from unforeseen issues such as job loss. But regardless of what triggers a low score, you can get your credit together and achieve a high rating.
Benefits of a Budget
Having enough cash on hand to make on-time payments to your credit card companies and other lenders will contribute to a better credit score. Payments make up 35 percent of credit scores. Establishing a budget for all your expenses and keeping within this budget can assist with timely payments because you're less likely to spend bill money on non-essentials. Along with careful money management, consider looking into other alternatives such as automated payments to help you pay on time.
Lower Debt Balances
Another big factor in getting your credit together involves carrying low balances on your credit cards. Consumer debt makes up 30 percent of your credit score. Carrying large balances is detrimental to your credit health. Start anew and begin paying down your balances on credit cards and stop taking out new lines of credit. Higher minimum payments, debt consolidation and negotiating better rates on your debt all contribute to quickly reducing balances.
Inquiries
Most consumers apply for new credit from time to time, so it's not uncommon to have an inquiry on your credit report. Inquiries occur whenever you apply for credit and a lender checks your report. An inquiry every now and again won't hurt your credit. But when you constantly submit applications for credit, it will gradually take points off your score and impede any efforts to build a better score.
Know Your Report
Get into a yearly routine of requesting your free credit reports from Annual Credit Report. The process takes a few minutes, and reports are viewable online. Look at your personal history carefully and take note of unfamiliar accounts, unusual account activity or outdated information. Report any errors you find to the appropriate credit bureau.
Be Patient
Getting your credit together doesn't happen overnight. It is a gradual process that occurs with consistently good habits. Continue to pay your creditors on time, reduce your balances and allow time for creditors to remove errors from your credit report. Check your progress periodically by purchasing your personal credit score from Myfico.com.
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