A 2014 National Foundation for Credit Counseling online poll found that people would be more embarrassed to admit their credit card balances (37%) or credit score (30%) than their age (1%) or weight (12%).
Just like losing inches in your waistline, if you want to improve your credit score you need to get moving! You won’t see results overnight, but you’ll be lapping everyone still on the couch.
Understanding Your Score
If you’re getting a loan, trying to rent an apartment, or applying for a job – your credit score will likely be reviewed. The higher the score, the lower the risk and the more appealing you look on paper. Your credit score is determined using several different pieces of credit information in your report. The data is then grouped into the five categories in the pictured chart, and weighted accordingly. Your FICO credit score considers both the positive and negative information in your report; a high balance might lower your score, while a good track record of payments on time will raise your credit score.
Improving Your Credit Score
The very first thing you’ll need to do is order a credit report, which you can do for free from AnnualCreditReport.com. Transunion, Equifax, and Experian (the three major credit bureaus), must send you one free copy of your credit report per year, so plan on ordering one every four months.
Step 1 – Carefully Examine Your Credit Report and Dispute Inaccuracies
From identity theft to human-error, there are several different ways an inaccuracy could land on your credit report. If after you review your credit report you see something that’s not quite right, first contact your creditor to resolve. Explain the situation, and kindly ask them to remove the error. If you’re having difficulty getting hold of or working with the creditor, it’s time to file a dispute. Most disputes can be filed online on Transunion, Equifax, or Experian’s website. Once filed, the credit bureaus are required to investigate and respond within 45 days.
Step 2 – Call and/or Write Your Creditors Asking for Help
Did you fall behind on your credit card payments a few years ago and now have a glaring 30-day late payment on your report? In some cases, a creditor will simply remove small hiccups if you request nicely. Here’s what to do. Call your creditor and explain the situation, how the slip-up occurred, and request that it be waived from your credit report. If it was a one-time occurrence, and there’s a legitimate reason why you missed the payment, some credit institutions might remove the late payment from your record, especially if you’re a long-time customer.
Step 3 – Lower the Amounts Owed on Credit Cards
Amounts owed, or your debt utilization ratio, make up 30% of your FICO credit score. Here’s how debt utilization works. If you have two credit cards, one with a $6,000 credit limit, and second with a $4,000 credit limit, you have a total of $10,000 available credit over both accounts. If you carry a $2,000 balance on one card, and $2,000 on the other, you would have 40% utilization over all of your credit. Typically, debt utilization of 30% or less is good for your FICO score.
The best way to improve your debt utilization ratio is to stop using your credit cards and pay down the balances. It’s not easy, but reducing the amounts you owe on credit cards is a solid boost to your score. Create a payment plan that puts most of your budget towards higher interest cards first, while maintaining minimum payments on your other accounts.
Follow these three steps and you’ll have your credit score rebounding in no time! If you don’t want to go through the hassle and effort of boosting your credit score alone, you might want to consider contacting a credit repair company to fix issues on your behalf.
Information provided by:
Chris Johns
Mortgage Consultant
NMLS #: 85440 / WA # MLO-85440
2627 Parkmont Ln SW, Unit 101 Olympia, WA 98502
Cell: (360) 870-4253 Office: (360) 347-8000 Direct Fax: (360) 338-0580
On Q Financial, Inc. is not a credit repair company. This is not credit repair advice, but rather suggestions and tips to use during the financing process. This material is provided for information and educational purposes only. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result there is no guarantee it is without errors.