Friday, September 5, 2014

6 Steps to Build Up Your Credit Score

Nobody is perfect. For some of us, our credit score is a prime example of that fact. Over time, bad financial decisions will negatively impact your credit score. It may seem like there is nothing you can do to fix the problem, but don’t worry—you can take steps to improve your credit score and many of them don’t even require you to leave the comfort of your home!

Your credit score affects various important aspects of life. A low score can mean higher interest rates and denial of loans or credit. Check out these 6 simple steps on how to build up your credit score.

1.    Check your credit report for accuracy. In this age of cyber crimes, identity theft is more common than you think. The firs step to build up your credit score is checking your credit report for fraudulent accounts. If you come across any inaccuracies, you can contact the credit report agency directly to dispute an account. The process can be a bit time consuming, but it will do a lot of good. You don’t want to pay for someone else’s crime, so it is imperative that you monitor your credit report periodically to prevent a lower credit score than you deserve. Once you find out your credit score, you can begin working towards improving it.

2.    Get a secured credit card. Secured credit cards are meant to help people with low credit scores to build up their credit. A secured credit card is backed by cash. Like a debit card, you can only spend the amount you have in the account. Every secured credit card is different and not all banks offer this option, so be sure to do your research.

3.    Pay down debt. Paying down some of your past credit card debt is a great way to start improving your credit score. This will help you to decrease your usage, giving you a lower debt-to-credit ration. That is an easy way to help boost your credit score. Don’t let your past missed payments prevent you from owning a home. Paying down your credit card debt is a great way to start building up your credit score. If you are in serious debt and face foreclosure, you should consult with an experienced bankruptcy attorney to see what your options are. Often filing bankruptcy can actually improve your score.

4.    Try to maintain a low account age. Keeping your total number of accounts as low as possible is a good practice. If you have too many accounts open at the same time, then your overall account age will be lower. Maintaining only a few accounts (in good standing) is a much better way to improve your score.

5.    Operate within your credit limit. This means opening only the amount of credit cards you can handle while still paying all of your bills on time. One missed payment can become a slippery slope. If you pay all of your cards and loans on time, you can start to build up your credit score. Try not to buy something unless you know you can afford it. If you can manage to spend under 30% of your overall credit limit, your score is bound to get better.

6.    Never take out a cash advance! Beware of cash advances and payday loans. These programs target low-income families and give the company long-term access to your bank account. A payday loan will negatively affect your score and you could be stuck with a 25% interest rate, forcing you deeper and deeper into debt. Cash advances will give you a false sense of financial security and ultimately cause your credit score to get worse.

If you want to build up your credit score, these 6 simple steps will put you on the path to doing so. Building your credit score successfully takes time, but it is well worth the work. Remember—any company that claims to be able to raise your credit score in a very short period of time is false advertising.

If you feel that you have been a victim of predatory lending, contact us for a free and confidential consultation with one of our experienced attorneys. We can work to help you rebuild your credit score and get back on the right financial path.

By Christopher Kelley