If you’ve ever run into financial trouble, you know how frustrating it can be when that information shows up on your credit report. Lenders use the information on your credit report to assess your risk as a borrower, and late or missed payments could make you seem like more of a risk. In addition, your credit score may be negatively impacted.
Luckily, you have some control over your credit score. Just like missing payments and not paying your debts can bring down your score, you can do things to build it back up. It takes some effort, but it is not impossible.
1. Understand your score.
The first step on the path to positively affecting your credit score is understanding what goes into it. A credit score is based on several different factors in your credit history, including your payment history, how much you owe, how much credit is available to you, the length of your credit history, and the types of credit you have.
However, two things influence your credit score the most: on time payment of your bills and your available balance.
2. Get your debt under control.
Start with getting a handle on your payments and total debt. If it’s tough to keep up with credit card bills, call the card issuer to explain your situation and try to negotiate a payment you can afford. Once you have that in hand, try to keep a balance of less than 30 percent of your available credit limit.
3. Remember: The length of your credit history matters.
You may want to avoid opening new credit accounts just to increase your available credit or applying for multiple credit cards over a short period of time. Either of these could have a negative effect on your credit score because of the impact of the length of your credit history.
4. Check your credit report.
Start making a habit of checking your credit score and looking through your credit report. You can get one free credit report each year from each of the three credit reporting bureaus through AnnualCreditReport.com. The site also lets you check your credit score for a small fee. Look for inaccurate information, and correct any mistakes. In addition to telling you more about what’s going with your credit score, checking your report can work as an early-warning system for identity theft.
5. Be patient.
It takes time to rebuild your credit history and positively impact your score. Don’t get discouraged if your report doesn’t immediately reflect the work you’ve put into rehabbing your credit file. Just be patient and continue working to gain more control over your finances.
In addition to keeping an eye on your credit balances and accounts, you may want to consider other methods of getting control of your personal finances, such as reducing household spending or creating a detailed budget.
You can also write a personal statement for your credit report. It won’t impact your score, but it can be read by anyone checking your credit report, from prospective employers to potential lenders.
With a little patience and discipline, you can positively impact your credit score and credit file. It will take time, but these steps can help you get control of your financial life.
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