Improving Your Credit Rating

How can I improve my credit score?

Now that you’ve established some credit (or even have bad or moderate credit), you want to know how to improve it. Although there are many additional steps you can take to improve your credit, the following actions are a great place to start:

Getting current with past due accounts – You should make an effort to resolve any past due accounts. This doesn’t mean you need to drain your savings in order to pay off the entire balance. Most companies will be more then willing to work with you to bring your accounts current and they might provide you with a flexible payment plan. In some cases, you may be able to freeze the account from accruing any additional interest for up to 6 months or more as long as you stay current on your payment plan.

Changing the number of accounts you have can also have an impact on your credit score.  When any particular company is assessing you as a credit risk based on your credit report, they may be looking at more then just your scores. Even if you are staying current on you monthly payments, the way you use your credit may also be a factor. For instance: when applying for a mortgage, many lenders like to see a minimum of four open lines of credit with at least a 2 year history of being in good standing. However, the reverse can also be true.

Some lenders will frown upon too many credit lines, especially if they all have high balances. This can suggest a lack of control when it comes to your spending habits. Related to this from the home purchase perspective is to try to avoid making new major purchases before you start house hunting. A new car or major appliances can be a red flag for a lender.  Opening new lines of credit right before shopping for a home can also have a negative impact on your credit.

And finally, be patient – Do not expect to magically turn your credit rating around overnight. It can take years to establish or repair a good credit history. Keep in mind that many types of adverse information will remain on your credit report for up to seven or more years. However, by staying vigilant and adhering to healthy credit activity, you will eventually begin to see your score improve.