Know your credit score : This is the first and most obvious step in improving your credit score. In most countries this report is available free . In any case it will not cost more than usd 5 per report . So have a look at your credit report very closely.
Dispute any errors in the report :
You may find errors and omissions in this report.
Make a list of the the errors diligently .
Then write to the credit bureau pointing out the errors , why you want to dispute them along with copies of any supporting documents.
Request for correction or deletion of all the errors.
Write to the creditors requesting them to correct their records for any errors.
Keep a track of all your bills : Keep a track of all your bill payments .
Maintain a box for all physical bills that you receive.
Create a folder for all bills that are send by email
Automatepayment from your bank account wherever possible . If you are like lot of us lot of bills remains unpaid as you tend to misplace them , procrastinate action or just forget about them . The best thing to do is automate the payment of the regular bills from your bank account.
Keeping a track will also help you to analyze your expenses and look for any opportunities to reduce expenses.
Ensure all your bills are paid on time : Delay in bill payment can happen due to different reasons :
You loose track : As mentioned above you may be forgetful , careless or just to busy . You have may have changed houses , but your bills are still being received in your old address. Take necessary steps to organize yourself . Try to get all your bills on email .
You have temporary cash flow problems : Prioritize your expenses . Try to pay back your high cost debts. Take a short term loan and consolidate your debts.
You are spending more than you earn : There is no other way but to reduce your expenses .
Make a list of all your expenses
Make a list of all your income sources
Calculate the maximum amount you can spend . This is your income less some money which you need to put aside for emergencies .
Now you know the maximum you can spend.
Cut out all the expenses you can eliminate from your list .
Discuss with your creditors and work out a payment plan .
Negotiate and close all your overdue debts : We need to accept our liabilities . In case due to our financial problems we have failed to pay our liabilities , we have to work out a plan to settle them .
Increase your credit limit : Credit utilization is a function of two factors , Credit Limit and credit utilization . If you have credit cards which you have been using since long time and have a good track record with them , you can approach them for increasing your credit limit . Also credit limit is a function of your income . You income may have increased since the time you took the credit card . Update your credit card company with your latest income and get your credit limit raised .
Don't close any cards : Closing credit cards will not improve your credit rating . Having some small balances and paying them off in time is good for your credit rating.
Utilize a lower percentage of your credit : Do not utilize your credit limit in full . The objective of the credit rating is to access your financial stability . In case your credit limit is over stressed you may have financial problem .
Build a good credit history : Wellmanaged debt is good for your credit rating. Having a small balance without missing payments reflects your ability to manage credit.
Don't take additional credit cards : Taking additional credit cards within a short period of time to improve your credit rating is a BAD idea. This sounds like a contradiction with point number 6. Let me explain the same in greater details :
The purpose of credit score is to assess a borrower's Creditworthiness , ability to absorb further credit , credit history . Applying for a lot of credit cards / debt shows credit hungriness . This is dad news for your credit score.
Whereas having unutilized limit from your old cards shows your ability to avail further credit if need be , within existing limits.
Rate shopping : Increase in the number of credit enquiries may affect your credit score. However enquiring to know your own credit limit does not affect your credit score. In case you need to shop around for credit and need to approach few lenders , do so within a very short period of time . Credit scoring companies takes into consideration increase in enquiries due to rate shopping.
The information on this site is strictly the author's opinion. It does NOT constitute financial, legal, or other advice of any kind. You should consult with a certified adviser for advice to your specific circumstances.