Many people have asked me, "What can I do to fix my credit?" or "What can I do to build a credit history?" Well, this post has a few of my thoughts on how to establish and improve your credit score.
-Acquiring a secured credit card in your name, can be great for building credit because almost any applicant can qualify for them, as they are backed by mandatory cash deposits. Just be sure that the company reports the card to the credit bureaus so your positive payment history can help build your credit file.
-Student credit cards can be great options for younger people who are just starting to build their credit history. These cards typically offer higher acceptance rates and may even come with promotional offers and rewards. One potential drawback is these cards usually have lower credit limits and higher interest rates.
-Retail credit cards can also be used to build credit. While they're usually easy to get and can help consumers save money at retail stores, these cards often have low credit limits and interest rates that are higher than non-retail cards.
-Asking to become an authorized user on a close family member or friend's credit card is also an option to consider. Since the card's history is usually reported to the credit bureaus, if you and the card owner use it responsibly, it should help the both of you. However, keep in mind that the opposite situation is also true-- if either of you miss a payment or rack up a lot of debt on the card, it could hurt both of your credit histories.
Increasing Your Credit Score & Maintaining Good Credit
- Before you can begin to repair your credit, you need to know what your credit history looks like. You should request a free copy of your credit report and check it for errors (see my “Credit Reporting Basics” post).
-Late payments and collections can have a major negative impact on your credit Scores. If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your credit score should increase. The impact of past credit problems fades as time passes and as recent good payment patterns show up on your credit report.
-Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a credit score. Pay off debt rather than moving it around. Don't close unused credit cards as a short-term strategy to raise your scores.
-Shop for new credit within a focused period of time. Credit scores can distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
- If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. Seeking assistance from a credit counseling service will not hurt your credit score.
Other Healthy Financial Tips
Even though the activities below don’t establish credit and usually don’t appear on a credit report, late payments or overdrafts may appear and can negatively impact your credit score.
-Paying utility, cell phone, or other bills that are in your name (Note: Some utility companies have begun to report your balances and payment status on credit reports)
-Opening a checking account and using your debit card
-Building a savings account
"Fixing" your credit is more about fixing errors from your credit past (if they exist) and then following the tips above to maintain good credit history. Although this will take discipline and patience, stick with these tips and you will see positive changes.