Saturday, May 16, 2015

How to Improve a Bad Credit Score

There’s a lot of talk, especially with the debt free movements (which are great, btw), about credit scores. Some people will tell you that credit scores are only important if you plan on taking out debt. Other people, like me, know that they are used for so much more.

In fact, beyond getting a good interest rate on a loan your credit score is used in determining your insurance premiums and can be a factor on rental and job applications.

Having a good credit score can save you a TON of money. And luckily, credit scores aren’t permanent. It will take some time to raise a low one, but it can be done.

Here’s how to improve a bad credit score.

First, Know Where You Stand

Let’s treat this like a game. It makes the process more fun. Before you begin to work on improving your credit score let’s see where you stand.

You can get a completely free credit score from Credit Karma here. There are no gimmicks. It’s one hundred percent free. This is a great service you should be taking advantage of so go ahead and do so.

You can use Credit Karma to check your credit score on a monthly basis.

Get a Copy of Your Credit Report

Next you need to request a copy of your credit report. You can get one copy per year from each of the major credit bureaus at

Look through your credit report for any discrepancies. If something is inaccurate dispute it with the reporting credit bureau.

If you have collection accounts on your credit report it’s important to note that paying those balances off early will NOT remove them from your credit report. They will stay on your report for seven years.

Lower Your Credit to Debt Ratio

One factor that plays a large part in your credit score is your credit to debt ratio. This is calculated by how much debt you owe compared to how much credit is available to you. The lower the debt to credit ratio, the better.

There are two ways you can lower this:

  • Pay down your debt.
  • Have your credit limits increased.

If you have a problem with debt and credit card usage then paying down your debt will be a better option than calling your credit card companies to see if you can have your limits increased.

Pay Your Bills on Time

If you’re behind on your bills then you need to work on getting caught up. Paying your bills on time is a huge factor in your credit score. This proves your responsibility.

Make every effort to pay your bills on time each month. Even if this means you can only make minimum payments.

It’ll Take a While

You’re not going to see immediate improvements in your credit score, no matter what you do. However, if you can work on paying down your debt and make your payments on time each and every month then you should see an improvement in six months to a year.