Most people know they have a credit rating; fewer know what theirs is, or how to influence it.
Here are a few steps you can take to improve your credit rating, increase your buying power, and strengthen your financial leverage.
- Use credit. If you don’t have a credit card, mortgage, or other line of credit, and you haven’t paid anything off on a recurring basis (a car, for instance), start now. This advice is not advocating debt; it is establishing your reliability as a consumer. Open new accounts judiciously.
- Pay your bills on time. Delinquency is the biggest credit score killer. Even if all you can do is pay the monthly minimum, keep up your payments. If that is too much, call your creditor and work out a more friendly payment schedule so that you can keep on top of it.
- Set up payment reminders. It’s easy to forget when bills are due; set reminders on your phone or computer, or the old-fashioned way on a calendar, so you don’t slip up and let a bill slide.
- Control your spending. Determine the difference between your wants and needs so that you are spending within your limit.
- Consolidate your debt. It can be overwhelming to pay a lot of creditors a little bit each for a long time. Instead of barely getting ahead, pay off the smaller, “nuisance” ones first so you can concentrate on the bigger ones. You can transfer your balances to a lower-rate credit union card, or use a credit union loan to consolidate your debt. But beware of continuously moving your debt; it must be paid down in order to improve your score.
- Watch the calendar. Every time you apply for credit – say to buy a house or car – your score takes a small dip. The length of the dip depends on the circumstances. So keep that in mind each time you prepare to make another large purchase; timing is key.
- Leave old debt on your score. Some people call credit reporting authorities to request that records of old debt be removed from their reports; however, a history of timely payments helps your score. Old, closed debt can be beneficial.
- Check your credit score yearly. Check yearly at least; more often is good, to ensure that no fraudulent activity is occurring under your name and that there aren’t forgotten accounts going into arrears. You're entitled to one of each of your three credit bureau reports (Equifax, Experian, and TransUnion) for free every 12 months through AnnualCreditReport.com. A smart tip is to stagger your reports. Send for one every four months, and you can monitor your credit all year for free.
Use our financial calculators to learn more about managing your finances.