If your score is sick, there are ways for you to nurse it back to proper health. All of them will require some thoughtfulness, planning and patience on your end, but a good credit score is well worth any trouble. Here are some suggestions if you find yourself playing “doctor”:
Cater To Your Bills on Time
This is seemingly a no-brainer, but it is the most important aspect to bettering your score.
“There’s about a 50-to-60 point shift when you’re able to pay all your debts on time,” says Sarah Davies, senior vice president of research, analytics and product development at credit scoring firm VantageScore, according to TIME’s moneyland.com.
If you are carrying a lot of outstanding revolving debt, pay down as much as possible as quickly as you can. In some cases, a zero interest balance transfer can really come in handy. If you can’t pay off all of your balances, at least try to make sure that none hover anywhere near your limit. According to Davies, ideally your goal should be to not tie up more than 30% of your credit limit at any given time. Credit scoring agencies factor in your ratio of debt to available credit when determining your score.
Get Help Managing Your Debt
If you are struggling with sorting out your finances, a credit counselor can assist you in outlining a plan to manage your debt. The National Foundation for Credit Counseling provides a list of member organizations, many of which are not-for-profit, that offer no or low-cost assistance. Should you enlist the aid of one of these services, you would meet with a counselor, either in person or over the phone, who will assess your financial situation and then help you to design a personalized budget. Your counselor will do whatever they can to work out deal with credit companies and other lenders to reduce interest rates, fees and penalties.
Time is of the essence here – should you opt to seek assistance from a counselor, you must do so before your account gets too delinquent and you debt gets charged off by your lender, after which point a credit counselor won’t be able to negotiate any reductions. Once a debt goes into collections, it will show up as a blemish on your credit report and stay there for seven years. Its negative impact will eventually be diluted as time goes by and your report records activity of a positive nature.
If too many blunders have damaged your score to the extent that you cannot find any lender willing to extend you credit, take a few months off from charging to focus on making payments on time. Then, consider a secured credit card. How they work is like this: you put down a deposit of a few hundred dollars and then that functions as your line of credit. Because you are not borrowing, but using what is yours and is already there, secured credit cards are available to people with compromised credit. Just be expected to pay an annual fee of as much as $30.
And call up the issuer to make certain that they report your timely payments to the three major credit bureaus because that is an essential part of repairing your score accurately and sufficiently, If you hesitate to contact the credit bureau you may cause damage to your credit overall in the long run.