Bank finance articles and tips

Improving your credit score starts with knowing exactly what your credit score is right now. So, first step is to obtain a copy of your credit report. This report contains your complete credit history, every financial transaction, what you bought, rented, leased, your loans, and payments to credit cards and utility companies. Everything is laid out showing the amounts, the dates, whom you paid, and, most important, if you paid on time as agreed. The good news is, you are entitled to a free annual credit report from each of the three major credit bureaus and there is only one government site where you can get these free reports. More on that in a minute.

1. Check your credit report for errors, mistakes, and charges that are not yours.

This is perhaps the fastest way to improve your score. You need to challenge anything that is not being correctly reported. It does happen. I caught errors and gained 10 points on my score immediately. If you find an error, contact the business or person who reported you to the credit bureau if you can prove the charge is not yours. Then, you challenge these errors in writing to the credit bureaus. Tell them your story. They will investigate and report back to you, usually within 30 days of your challenge. Once you clean up your report, sign up for a credit monitoring service. They are cheap, about $30 a year, and you get monthly reports plus immediate alerts when anything appears on your credit report. It is cheap insurance to keep an eye on your credit.

2. Get your payments caught up to date.

Look over your report. You will see what they call "aging." Your payment history is shown in 30-60-90 day payment increments. Get those cleaned up first by paying them up to date and keeping them on time from now on. Late payments are the top killer of good credit scores. Every late payment causes points to be deducted. The next problem areas that show up is when collection agencies have been after you or you have gone bankrupt. Collections are a major problem that will take a personal phone call from you to make arrangements to clean these up. As for bankruptcy, that will be on your record for up to 7 years and you cannot get that erased. All you can do is counter-balance by building a new credit history that shows you are now a responsible individual.

3. Managing your income-to-debt ratio.

One of the biggest red flags to creditors is how much available credit you have compared to how much of that credit you are using. In other words, if you have $10,000 available to borrow and you have borrowed $8,000, you look maxed on credit. You need to borrow 50% or less of what you have available. Your credit limit is based on your credit score, income, average living expenses, and your history of paying your bills. It is a formula they use to calculate your score which is why you never want to max out your credit limit even if you pay your bills on time.

4. Don't give your social security number immediately when applying for credit.

Every time a lender makes an inquiry into the credit bureau, it shows in your credit report. Multiple inquiries can look suspicious to potential creditors so here is what I do. When I apply for credit I do my research into interest rate, fees, and charges. If I like what I see, I will tell them everything they want to know except my social security number. The number I give them is my credit score and ask them to base my worthiness on all the information I have provided and on the score. If they say they will grant me the credit based on that information, I will then give them my social security number to seal the deal. This practice has served me well. No potential lender has ever had a problem with it.

5. It takes time to build financial health.

It takes time to build a great credit report and score. You begin with the foundation as outlined above in 1. and move on from there. It may take weeks, months, even more than a year to get your score to over 700 but it is worth the time and effort. Many financial options will open to you, that are now closed, when your credit history reflects your new ability to manage credit and debt.

Don't fall for marketing hype. To get your free annual credit report go to ftc.gov/freereports or keep scrolling down.

To learn how to get your score over 700, visit Annual Credit Report Scam for Free videos, articles, and discussion to help you improve your credit score fast. It's a Free blog. No signup for anything. Visit now.

By Vin DeSantis