4 Actions to Achieving Better Credit Scores

As the recession is still fresh in consumer’s minds, people seem to be working more diligently to repair their credit and reduce their spending. Since most people took a financial hit over the last year, many are working to ensure it doesn’t happen again. One step towards a better financial future is to understand where you are now.

Late payments, missed payments, delinquent accounts, and maxing out credit cards are all ways to destroy your credit history and bring down your credit score. If you had suffered a job loss or were cash-strapped enough to miss your monthly financial obligations, your credit likely suffered. Since credit scores are vital should you ever need financing in the future, it is important to beef up your credit and keep your score as high as possible.

If you think ‘I don’t need any loans so why bother?’ – think again. Credit scores are now used to determine more than your credit worthiness. Employers are running credit checks on new job applicants and insurance companies are checking the scores of drivers to determine risk. So if you don’t plan to get a loan, a job, or insurance then rebuilding your credit may not be a priority. For the rest of us, we can take action to building better credit.

Here are 4 things you can do to get back your good credit:

Order Your Credit Report and Score

Every year, consumers have the right to order their credit reports at no charge from three credit reporting agencies: Experian, Equifax, and TransUnion. You can also receive a free copy after you have been denied credit. In addition to the free annual reports, consumers can purchase a copy at any other time. Credit scores are not free. They usually run about $15 for each report. Order each report and score and review every bit of information.

Correct All Mistakes and Misinformation

Credit reporting bureaus receive information from your creditors about your account activity. There is no guarantee this reported information will be right so it is up to you to ensure it is. Misinformation can lead to a drop in credit score points. Any information you find to be incorrect should be noted. After all information is reviewed, use the reporting bureaus form to list the mistakes contained in the report. The credit bureau will then investigate all claims with the creditor. Results will be reflected on your credit report.

Pay Off Debts

Using your credit report, you should make a list of all outstanding debt balances and the creditor to whom you owe the debt. Make every effort to pay off the debts, even if you have to do it one debt at a time. You may have to negotiate your debt settlements and payoffs with the creditor or collection agency to eliminate the debt. It will take time and effort but paying off all debts will eventually be worth it. Your credit will be strong and your financial future will be more certain.

Apply for a Secured Credit Card

After you have completed the above three steps, opening a secured credit card will start the process of rebuilding your credit foundation again. A secured card typically involves consumers sending in a specified amount of money. That money will then be held in the customer’s account and essentially be the credit limit of the card. For instance, if you set up your secured card with $500, you could only spend up to that limit. While this type of credit card sounds more like a bank, the difference is that the card company reports monthly back to the credit bureau. As long as the account is in good standing, positive information will be recorded on your report and you will start to see your scores rise again. If you had lost your creditworthiness in the past, a secured credit card is a good way to reopen the door to a traditional card. After six months to a year of using a secured card and gaining the credit benefits, you may be eligible to then switch to a traditional card once your scores have improved.