The C-word. It's a daunting thing. Your credit report and credit score can drastically affect the things in your life such as interest rates, loan approvals, and sometimes can even get you denied to rent a property. That is a lot of pressure, stress, and anxiety from one little number. This is why fixing your finances is absolutely a part of gaining total wellness. You want to feel in control and relaxed when you go to make a big purchase like a new car or home, without the added stress of being turned away for not proving your "credit worthiness".
Only about 1% of the entire population has a perfect credit score. As discouraging as that sounds, it is my personal belief that this percent would be a lot higher with a little education and effort. If you are reading this, you are looking to improve your credit score, and the great news is it is absolutely possible by just doing a few simple things. The first thing you will need to do is obtain a copy of your credit report and score so that you know what you are dealing with. Even if you do not know what the numbers mean, your score will clearly let you know if you have an excellent, good, or poor score. There are a number of steps you can take to make that number go up, and improve your chances of credit approval.
1. Search For Errors
Studies show that about 80% of credit reports contain errors. Your credit history could span back decades, so start with personal information like inaccurate addresses. Other errors your report could contain are accounts or charges that were not authorized to be opened by you, accounts that have been closed or paid still showing as open, and open accounts that report the wrong amount owed. Dispute all errors, as they will likely be removed.
2. Check and Eliminate Balances
If you have credit cards, it is important that you not only pay down the balances on those accounts, but that you are also keeping your income to debt ratio down. Even if you pay your balances in full each month, it will not look good to utilize your full credit limit each month. So pay your balances, and keep them low. Also, make sure you do not have too many open accounts with balances on them, as this could affect your score. It is often better to have one card with an $80 balance than two cards with $30 and $50 balances. Low balances and on time payments are key.
3. Pay Bills on Time
This is probably the most important thing on the list. When you are applying for a loan or credit card, the creditor is basically checking to make sure you have the ability to make on time payments to your debts. Falling behind on payments can result in your credit score being lowered, even if you are only a few days late. If you need to, enroll for automatic bill payments or schedule auto payments on collection debts so that you stay up to date.If you have any late payments, catch up and stay on top of it. You could even pay your credit card balance early, and the bureau reporting will reflect a lower amount due, which is a factor in your credit score.
4. Keep and Use Old Accounts
Some people think that closing old credit card accounts they have not used in a while will help them not to overspend. However, this could end up being bad for your score, because the length of time an account has been open raises your score, as it establishes your credit history. People with credit history of less than a year often have very poor scores, and people who possess perfect scores, among other things, have had accounts open 20 years and upwards. Along with this thought, you may want to spread your charges out among your older cards with a charge or two each month to still keep your balances low and assure you can make your payments. That's because credit card companies have started closing inactive accounts, so you want to show some activity in order to maintain credit history and continue to raise your score.
5. Get a Pro
Depending on the state of your credit, you may benefit from the help of a financial planner, or a credit repair specialist. They are trained in this area and working with a credit repair expert can alleviate some of the pressure of contacting creditors and develop an action plan to reach your financial goals.
Krysten Jai is a professional organizer, certified life coach, and wellness consultant. Her blog, UrDailyFix and business under the same name are catered to personal development, productivity, and wellness.