Finance Blog
Improve Your Credit Score and Creditworthiness
Bad credit can happen to good people; don’t despair if it has happened to you. There are ways you can get your creditworthiness in shape over time and improve your credit score. But you have get started today—and keep working hard to show potential lenders you’re serious about getting your ability to take on credit in order.
As you work toward your goal, your creditworthiness should improve, resulting in better credit offers being sent your way that can help you save money.
Because accurate and timely credit information generally cannot be removed from your credit report, there are no quick fixes to improve your creditworthiness. However, by improving your creditworthy behavior going forward and over time, you may be able reestablish your creditworthiness and your credit capacity.
Get started on increasing your creditworthiness
Open new accounts and pay them off. Being able to repay a variety of new accounts is a key step in rebuilding your creditworthiness. This means that devising a strategy to open and pay off as many different kinds of accounts as you can is better than adding more debt to an existing credit card.
Start small. Reestablishing your creditworthiness can be similar to starting over from scratch. Starting small, with credit cards from department stores or your local credit union, can be useful in this case.
Consider asking for help. If you can’t qualify for credit on your own, ask a friend or family member to cosign for a small loan or credit card. If you can stay current on a major credit card account or small auto loan, it will speed up the process of reestablishing good credit and improving your credit score on your own.
Consider a secured credit card. Secured cards are guaranteed by a deposit you make with the credit grantor and offer the purchasing power of a major credit card. Just make sure the grantor reports payment histories to the three major credit-reporting companies so that by using your card, you are building a positive payment history.
Use your new accounts in moderation. In addition, make payments that are more than the minimum. You can keep a small balance on your new accounts so that your positive payment history will continue to show up on your credit report.
Keep your balances low. Avoid carrying a balance of more than 30 percent of your credit limit. Lenders may view this as excessive debt with which you may not be able to stay current.
Reduce your household spending. Review your household expenses and determine which ones you could do without. Consider creating a budget to track exactly where your money goes each month.
Call lenders if you can’t pay some of your debts. Explain your situation. Some lenders will be willing to work out a plan for you to pay back what you owe.
Contact a reputable credit counseling agency to make a plan for paying off your credit bills. Beware of agencies that offer “quick fix” ways to get out of debt. Talk to counselors at a consumer credit counseling agency such as CredAbility.
Check your progress
By reading this article, you have taken the first step toward reestablishing your credit. Now it’s time to take the next steps. Do you know exactly where your credit payment history stands? Find out by purchasing your Equifax Credit Report™ so you can monitor your credit file.
It takes some time for your new creditworthiness to gain momentum. You are demonstrating that you are not depending on certain credit cards and loans for your financial survival. That’s why opening and paying down accounts may make it a little easier to get more credit.
With patience and timely repayments, you’ll likely be able to reestablish your creditworthiness so that lenders will look on you favorably when making decisions about your ability to handle even more credit.
READ MORE:
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6 Ways To Prevent Identity Theft
Becoming a Victim of Identity Theft: How It Happens
Credit Trends: Mortgages and New Credit Cards
Money Management Tips: Choosing the Right Savings Account
Money Management Tips: Set Your Savings Priorities
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How does a deed in Lieu of forclosure affect credit?
Two questions: 1) Does someone checking my credit score (auto dealer, phone company) actually lower my credit score and if so is it significant enough to worry about?
2) does starting off with a credit card that offers an annual fee but no interest for the first nine months hurt me if I drop the card after using it and leaving it in “good standing” when they introduce the 22% interest after the nine months?
closing an account will remove that amount of available credit from your file and will in effect lower your score because of the debt to available credit ratio. higher ratio means lower score.
@KC Hall — Thanks for the questions.
1) Inquiries can affect your credit score, but the impact depends on whether it is a hard or soft inquiry. There’s more information about the different kinds of credit report inquiries here: http://blog.equifax.com/credit/interest-rate-shopping-and-its-effect-on-your-credit-score/
If you’re shopping around for a mortgage or auto loan, you have 30 days to check out different interest rates. The inquiries within 30 days will count as ONE inquiry on your credit report.
2) How you use your credit cards will definitely affect your credit score. It’s not the interest rate, but your available balance, and your payment history that will affect your credit score. However, opening and closing cards frequently can also affect your credit score. Find more information about credit cards here: http://blog.equifax.com/credit/credit-score-changes-how-does-closing-an-account-affect-my-credit-score/
Thanks for reading.
If an item gets paid off– a bad debt and shows paid does that raise score a little bit?
Paying off debt is usually a positive activity on your credit report. Every situation is different, but you can find more information about debt and your credit report here: http://blog.equifax.com/credit/good-debt-vs-bad-debt-evaluating-your-debt-ratio/
If I have a note on my credit report, beside my car loan, saying that my car loan is a “garantied loan”, is that a bad note to have? Does it affect negatively my credit score?
I have found predatory lenders are also big customers of Equifax and other bureaus. Regardless of the FCRA; no one will listen to a borrower when an item is in dispute. Predatory lenders are using the CRA’s to harass consumers via credit reports.
They dont have to provide any data supporting their claims to the consumer nor the bureaus. They simply have to say “its true they owe us money!” and the info keeps riding. I have had these lenders destroy my report then they are the only ones to step up and offer credit at exhorbitant rates. All of the bureaus actually have links on their sites; handing over fraud victims for even more abuse!
The fraud is not from identity theft but predatory lenders offering 200-300 credit limits with the promise of rebuilding credit. Then your score is lowered for having a low limit account. No matter how well you pay it will not help your score. You will not be offered any higher limits and no one will want to touch you when orchard bank, capital one, providian, hsbc or any other such lender is on your credit report. They will not reward you for making timely payments.
I have actually had one of those accounts and paying it ahead and trying to establish a good history only got me a lowered limit. That way, it appears I had charged the account to the limit. My score was dropped, I could go no where else. Their excuse: “You’ve had derogatory credit elsewhere therefore we had to lower your limit.” The truth is….they were aware of the derogatory credit when they offered the card. If you really try to get out of the trap they do what ever they can and pass you around to other predators while Equifax looks the other way.
The bureaus are like killer robots destroying the consumer at the whim of predatory lenders who are actually bigger customers than any of us could ever afford.
I have two entries from a credit account that was made with automatic payments and extra payments on the balance every month. They ran the account back up with late fees triggered by the extra payments!
Now it is listed as two seperate entries and disputes have been completely ignored. When I call the creditors they have no idea what Im talking about but Equifax will not budge. The creditor has no record but none of the bureaus are listening. They wont upset a high paying business customer. The business customer can afford the higher fees since they can take 2000.00 for a 200.00 loan.
I sure would like that rate of return, where do I sign up?