If you have bad credit you might think you are doomed to ride the city bus and rent a house your entire life. Items such as a bankruptcy or debts in collection are going to ding your credit. These negative items will stay on your report for the next seven years. So you may think that you’re screwed for several years. But that might not be the case entirely. Sure, bad mistakes made when you were younger are indeed going to hurt you, but there are things you can do to to boost your credit score right away.
Here are 3 simple ways you can improve your credit score right now.
1. Credit Utilization Rate
If you want to immediately impact your score, start by reducing your credit utilization to less than 25%. Credit utilization is a term that refers to the amount of credit you use compared to the credit available to you. Experts note that around 30% of one’s credit score is derived from their credit utilization. As such, you can easily reduce your utilization by paying off credit balances as well as avoiding maxing out your credit cards.
So for example if you have 4 credit cards with a combined $10,000 credit limit, only have up to $2,500 on those cards. This shows the creditors that while you have a lot of available credit, you have the self control to not use it all up.
2. Make Timely Payments
Second, you should pay your bills on time every month. Missing monthly payments can really hurt your credit score. Financial advisers often state that payment history makes up a third of one’s credit score. This makes bill payments one of the most important factors when trying to raise credit scores.
Simply making your payments on time will raise your score. To put this in a different way, a missed payment will affect your score right away. Luckily, the impact of a missed payment goes away very soon. But that’s not going to help you if you’re applying for a loan soon.
3. Dispute Errors
Thirdly, you should review and dispute any inaccuracies present on your credit report. If you have a low credit score and are trying to raise it, the first thing that you should do is to review your credit report. Negative items that are actually errors can be disputed and removed. The effect that this has on your credit score can be quite astounding. It is worth noting that close to 80% of all reports have some kind of error which makes it important to check your credit report on a regular basis.
Get your credit report for free at annualcreditreport.com and inspect it thoroughly. If you see an error, such as a debt that isn’t marked as paid off in full, you need to dispute it. Contact the credit bureaus and get these mistakes corrected. Once they are fixed you’ll get a bump in your score.