Most people experience a time at least once in their lives when they need to evaluate their credit to help them get back on track. Keeping your credit on the right track is important if you want to make major life purchases, such as a vehicle or a home. If you’re struggling with your credit score, there are several things you can do to help get it back on track and on the road to financial wellness.
Pinpoint Areas of Improvement
The first thing you should do is pull a copy of your credit report to get a better picture of your overall finances. Look over your report for any discrepancies, such as old debt that hasn’t been removed or other errors that could be resulting in a lower score. Also look for inaccuracies in your report, such as errors with your Social Security number, name, address, or birthdate, which could impact your score. Your credit report will also show if someone has used your information for fraudulent purposes. So if you see new accounts or loan applications that you weren’t responsible for, you should address it right away with the major credit bureaus. If everything is accurate on your report, your next step is to check for areas that you can improve, such as paying any outstanding delinquencies or lowering your debt-to-income ratio if it’s too high.
Create a Plan to get on Track
After you’ve pinpointed areas that you need to improve, your next step is to create a plan to address the issues on your report. You can help improve your credit by paying outstanding creditors, consolidating credit card debt, and avoid opening new cards which could affect your overall revolving debt. If you’re trying to fix your credit after a major financial pitfall, you can build up credit after bankruptcy by being smart with your credit and opening a secured credit card, which can help you build your credit back up safely. Some areas that you should keep in mind when you’re looking to improve your credit are how different aspects affect your credit score. Your score is broken up into segments, with the largest being your payment history, which makes up 35% of your score. Next is your overall outstanding debt, which is 30% of your score. The length of your credit history comprises 15% of your credit score and credit mix and new credit each make up 10% of your credit score.
Avoid Future Mistakes
To avoid mistakes in the future that could potentially harm your credit score, you can make some changes to managing your finances to give you a healthier portfolio. This includes paying your bills on time to avoid falling into delinquency which could lead to your accounts being sent to collections. Don’t let your balances on revolving credit to get too high or your score could see a negative impact. If you’re still struggling after making these improvements, you may want to consider talking with a professional financial advisor to see if there is something you’re overlooking that could be addressed.
Improving a bad credit score takes a bit of work and some time, but it’s worth it in the end. Having a good credit score can improve your chances of getting a better rate on a car or home loan.