Improving your credit score is like building Rome. It isn’t going to happen overnight and you probably don’t want to do it alone. That’s why you have to see improving your credit as a journey, and why you should get help from friends, family, and your buddies over here at the OppLoans Financial Sense Blog.
In order to give you a sense of the steps you’ll take on your credit score voyage, we spoke to Courtney Sanders, an entrepreneur and speaker who overcame her own bad credit problems, and friend of the blog Jeanne Kelly, one of our favorite nationally recognized credit experts.
Lace up your shoes, because your credit journey is about to begin.
Start paying off your bills on time.
This can be the simplest, and sometimes, the most difficult step. But according to Sanders, it’s an important first step: “Pay your bills on time every month, even if you have to call the credit card company and negotiate a lower minimum payment. The important thing is that you establish regular, on-time payment history.”
Your payment history is 35% of your credit report, making it the single largest factor in determining your credit score. That’s why it’s the first place to start fixing things up. It can take real sacrifice and dedication to get your bills in order, especially if you’re far behind. You shouldn’t hesitate to ask friends and family for help if you need it. Having a better credit score might mean you’ll be in a better position to help them out if they ever need it.
Look back at old loans.
Just because you’ve forgotten about old loans, that doesn’t mean those loans have forgotten about you. Those old loans can impact your credit score now. You should review your entire financial history early on your journey to fix your credit. According to Kelly, one of the big examples of past loans deserving of review are student loans:
“Review all your student loans after graduation. You might have old emails or old home address, as your parents possibly moved after you graduated high school. If you do not get notices once payments are due, that will drop your credit score if they are not paid on time. It’s very important to check on what loans you have outstanding and when payments are due. Often students do not realize that each semester the loan was taken out is another account on your credit report. So, if you happen to go to college for eight semesters and needed loans for each, that would show up as eight separate loans on your credit report. Miss one payment and that is eight loans in the negative section of your report showing that missed payment. You might want to look into consolidating the student loans into one loan after graduation.”
Start managing your credit card properly.
It isn’t enough to just pay your bills on time. The next step of your credit score journey is using your credit card in a smarter way. That’s why Sanders recommends you: “Manage your credit card utilization ratio. Don’t carry a balance higher than 30 percent of your available credit at any one time.”
Your credit mix might only be 10 percent of your credit score, but you want all the help you can get. Even if you’re paying all your bills, having too much racked up on your card doesn’t look good to the credit bureaus who calculate your credit score.
Don’t close other cards.
Although having too high a balance on your credit card is bad, that doesn’t mean that no balance is better. It might seem counterintuitive, but closing old credit cards can actually make your credit situation worse. Here’s how Sanders explained it:
“Keep credit lines open. I know when people are trying to get out of debt they think they should pay everything off, close all of those credit card accounts, and that will improve their credit score. While paying things down is definitely great for that credit card utilization ratio, if you close the account it could actually hurt your credit score because you want to establish credit history. So the longer that you have credit lines open and you can demonstrate that you have a good track record in paying your bills every month, the better it is for your credit score.”
The length of your credit history is 15% of your credit score, so again, not the biggest part, but not nothing either!
The promised land of better loan rates.
It won’t be an easy journey, but the destination makes it worth it. Whether it’s getting better rates on a loan, a car, or even a job you might get turned away from if your credit was worse, it’ll all pay off in the end.
Jeanne Kelly (@creditscoop) After being turned down for a mortgage 15 years ago, Jeanne Kelly realized she needed to get her credit in order. Not only was she able to fix her bad credit, but she took the skills and knowledge she gained and decided to share it with the world. Now she’s a nationally regarded credit coach and expert, with multiple books and television appearances. Follow her on Twitter and check out her site to get the credit help you need!
Courtney Sanders is an entrepreneur, speaker, and rising authority on women’s empowerment. Through her training and development company, Think & Grow Chick, LLC, Courtney provides online & in-person education, mentorship, and community for millennial women. After educating herself on the “ins and outs” of personal development, money management, and entrepreneurship, Courtney climbed her way out of debt in a few short years and went on to successfully launch Think & Grow Chick.
In 2015 she authored the book, Get What You Want: The Ultimate Guide to Figuring Out + Getting What You Want in Life which has since served as a catalyst for several related trainings and programs.
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The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.