Raising your credit score can increase your purchasing power, get you better terms on loans for things like cars and houses, lower your insurance premiums in some states, and make it easier to get a job or an apartment. If you know your score is low (you can check out your credit history by obtaining free credit reports from one or all of the three main credit bureaus, Equifax, Experian, and TransUnion), there are things you can do to raise it.
- Confirm your report is accurate. Mistakes happen, and they can cost you. If you find any errors – accounts showing in default that you know you paid, items that don’t belong to you, inaccurate credit limits listed credit cards, etc. – dispute them.
- If you have accounts that have gone to collections, work with creditors to remove them. Ask them to report them as “paid as agreed” or remove the item in exchange for a new repayment agreement. If you only have one or two late payments, ask the creditor to remove them if the rest of your history is good.
- Consider opening a new card. Having maxed out cards or very little available credit can really hurt your score. Aim to use no more than 30% of your total available credit. Opening a new card can help put your debt-to-credit ratio back where you need it to be. If a new credit card isn’t an option, consider a secured credit card that reports to all three bureaus or becoming an authorized user on a friend or family member’s credit card. If you have cards with no balances, don’t close them: You’ll have even less credit available to you.
- Limit or completely stop borrowing. Remember that debt-to credit ratio? Don’t add to it. If your cards are paid off, keep them that way. Just because you can borrow more doesn’t mean you should. If you’re going to use your card, borrow only as much as you know you pay off that same month and be sure to pay it off.
- Ask for a credit increase. Following the same logic as above, ask for a higher credit limit, but then try not to use it. Doing so opens up your available credit. Again, don’t use this as an excuse to spend more or else you’ll defeat the whole purpose!
- Pay your bills on time. Don’t miss a payment - - ever! If you think you can’t make a payment, call your lender and try to work out an arrangement. Ignoring them or pretending the debt doesn’t exist will usually backfire.
- Obtain a car loan. Having different kinds of loans on your credit history can help. Credit card debt, known as revolving credit, is just one type. Installment loans, like a car note, will also show you as a responsible borrower.
Raising your credit score isn’t always easy. It usually takes a lot of work on your part to curtail spending and pay down debt. In the end, it’s always worth it. If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you ever step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!