For millions of people it happens every year. For whatever reason, your credit takes a big hit and your credit rating is a mess. It could be from a loss of a job, a divorce, or a whole host of reasons, but the question remains, what can be done to clean up my credit rating?
It’s important to note before we go into some specific tips to help your situation, that you should avoid the companies offering to erase your bad credit, or credit card debt. These scams are only trying to further separate your money from your wallet. There is no quick fix to credit problems. It will take a little time and a commitment to make it work. So don’t throw your money away on these credit programs.
5 Steps To Re-Build Your Credit Rating
1. Get a copy of your credit report. In order to begin repairing your credit, you’ll need to know what is in the report. The three major credit bureaus are TransUnion, Experian and Equifax.
When you get the reports, look them over and check for errors. It is quite common for an error to show up on your credit report. If you find one, get in contact with the creditor and begin the process of having it removed.
2. Stop applying for more credit cards. Every time you apply for a new credit card it will show up on your credit report. When several inquiries take place over a short period of time it looks bad in the eyes of a lender. It has a negative effect on your credit rating and can cause you to be turned down for a loan.
Of course, you should shop around for the best deals on credit cards, home loans, car loans, etc. It’s just that you shouldn’t apply for all of them.
3. What are your credit card balances? Do you know how much your credit card balances are? Are they maxed out? Knowing how much you owe is critical to getting your credit rating improved. Keep your balances within 50% of the credit limits on them. Any more than that and it looks like you can’t control your spending in the eyes of lenders.
4. Get rid of inactive accounts. Do you still have an old credit card account that has no balance and you never plan on using it? Consider getting rid of it then. Lenders look at the total number of accounts you have open, as well as your debt potential. If you do close out an account, be sure you do it the right way.
5. Get your balances paid down. To improve your credit rating it is essential to pay down your balances. If you’re having a tough time making the payments, call them and talk to them. They will work with you in making payment arrangements. This is far better in the long run than letting your account go to a debt collection agency.
By following these 5 steps you can begin to dramatically improve your credit rating. While it will take a little time, you can finally get your financial situation back on the right track.