Regardless of where you are in life or what your future goals might be, your credit score is probably one of the most important numbers that you’ll ever have. It is used by everyone from employers to landlords, and can work to either help or hurt you when it comes to making major life moves. If you haven’t been keeping up with your score, or if you know that it can be improved, there are steps that you can take to put you in a better position. Here are 7 things that you can do to get you on the road toward a credit score that you can be proud of.
Avoid opening several accounts
Don’t get into opening several credit accounts to build your credit score. While lenders do like to see a diversity of credit when you apply for large purchases like a mortgage, it’s best not to bite off more than you can handle in the beginning stages of rebuilding your credit. All you need to start with is one open account in good standing. Also keep in mind that applying for new credit decreases your credit score, so keep new applications to a minimum.
Remember that a minimum payment is better than a missed payment
When building your credit, always remember that slow and steady can still win the race. Even if you’re planning to make a large lump-sum payment toward a debt, be sure not to miss the smaller minimum payments that are still due every month. You can always pay more than the minimum or make additional payments throughout the month.
Keep credit card balances below 30%
Just as important as paying on time is keeping your balances low – at least 30% or lower. This means that, at any given time, only 30% of your credit limit should be used on each credit card. Anything higher than that signals to credit agencies that you might be relying too heavily on credit to make ends meet, which then makes you a financial risk to potential creditors.
Use a secured card
Secured cards are similar to credit cards in that they can help to build your credit. They are also similar to prepaid cards because you can only spend what you load. If you are looking to build good credit history, research your secured card options. Be sure to choose a card that reports to the credit agencies. It is important to note that you should, ideally, not carry a balance on your secured card. Use it to make a few purchases each month, and then pay off the balance using your checking account
Avoid collections at all cost
Did you know that a single collection item could lower your credit score by 30 points or more? When a company threatens to report your debt to collections, make every attempt to resolve the matter before it reaches the collection agency. Once collection items are on your credit report, there is no guarantee that you will be able to remove it, even if you pay the debt in full.
Communicate with your debtors
One of the biggest mistakes that many make when experiencing a financial hardship is to not inform their debtors. Many lenders have hardship programs that are designed to offer grace periods or reduced payment plans to those who need it. When inquiring about a hardship program, contact the debtor to make sure that your partial payment will not be counted as a missed payment.
Get everything in writing
Whenever you speak to debtors, remember to note the employee’s ID numbers and request that documentation be sent to you after the conversation, especially when making payment arrangements and agreements. That way, if they do not uphold their end of the agreement, you have the written documentation to support your dispute.
All data and information provided on this blog is for informational purposes only. The opinions, conclusions and other information expressed reflect the views of the author and does not necessarily reflect the views or positions of UniRush, LLC.