Starting from Square One

If you find that you aren’t getting approved for credit cards or loans, or aren’t getting good rates for financing, then you might need to make some improvements to your credit score. Building credit isn’t a particularly quick or effortless process, but we have some tips that can help you along the way. Even if you feel like you must completely go back and start from square one.

Make Sure Your Credit Reports Are Accurate. One of the first things you want to do with improving your credit score is to check your credit reports and make sure everything on there is reporting accurately. Since your credit scores are based on the data in your credit reports, it’s incredibly important to make sure that all that information is accurate. If you have a mistake or discrepancy on your credit report, your credit score will reflect that mistake and you will want to get it removed or fixed.

Pinpoint What You Need to Improve. If your credit report is accurate, but you still have a poor credit score, it’s important to understand why. So, let’s start with the major scoring factors and how each can impact your credit score. Payment history, amount of debt, the age of accounts, account mix and how many inquiries, these are all factors that are going to hurt or improve your credit score.

Create a Plan to Improve Your Credit Score.  Now that you have made sure everything is accurate on your report, pinpointed exactly what you want to focus on, the next logical step is to create a plan to improve your credit score. You should aim to keep your credit card balances as low as you can. You should also begin the task of paying down your debt rather than moving it around, and you shouldn’t close any unused credit cards as these could be helping you. If you find yourself in a high balance credit card, simply do a balance transfer to a lower interest rate credit card. Remember, you don’t want to close out that original credit card, but you also don’t want to run up more debt on it either. A great tip is to completely remove that card from your purse or wallet. Leave the paid off credit card at home so that you won’t be tempted to use it and get more in debt.

Fix Your Credit Utilization Ratio. If your credit card balances every month are more than 30% of your credit limits, your score is suffering, even if you’re paying off your balances in full every month by the payment due date. So, keep an eye on those balances, and consider pre-paying some of the balance if you know you’ll be above that 30% mark this month. The debt-to-credit ratio is considered one of the more key factors that help determine consumer credit. Your debt-to-income ratio also plays a crucial role regarding your credit and is basically all the monthly debt you have divided by your gross monthly income.

Following these tips will not only save you money but also teach you the valuable skills necessary to maintain a good credit score in your future. If you have poor credit, don’t give up on credit entirely. Instead, be responsible and stay educated about your accounts and scores so you can successfully handle your own finances and remember your credit union is always here to help you with our counseling services and Credit Builder Loan.

If you’d like to learn more check out our online Learning Center.

Until next time,
Chelsea Springli

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