If you have bad credit, expect to take about a year or two to get it up to a better credit rating. How do you do this? Let's review:
- Pay your bills on time. This alone will show good faith to your creditors and have a positive effect on your credit rating.
- Don't use credit at all if possible. That means cutting up your credit cards and paying cash for the things you need.
- You may want to keep one credit card that you can use for emergencies - but remember that it is for emergencies only. Keep the oldest card you have as that shows you are not newly applying for credit.
- A good idea for not using that one credit card is to freeze it in a block of ice. It won't damage the card and it will require thawing before you can use it. That way, you will have to wait before making a purchase thus eliminating the lure of an impulse purchase.
- Don't apply for new lines of credit at all. The only time you should ever be applying for credit when you are financial straits is if you need to make a big purchase such as a vehicle or home.
- Monitor your credit report faithfully and immediately correct any mistakes that you find.
- If you find that you cannot make a payment on time, call your creditor and explain the circumstances. If you have been a good customer, they may be willing to accept a late payment and waive the late fees. Try not to do this too often as it can reflect poorly on your payment history.
- If you have little to no credit, you can establish credit by obtaining a department store or gas credit card. Then you make a few purchases and pay the balance off immediately.
- Be very careful when making purchases online. Make sure that when you are entering in your credit card number it is done on a web site that starts with https://. The "s" at the end of the http designation shows that it is a secure sight that will keep your information private.
- Beware of "phishing" e-mails that direct you to a separate site where you are asked to provide personal information. This is how many identity thieves obtain your bank account or credit card numbers and they can run up horrendous bills in a few moments of time.
- If you want to obtain a large loan as for a vehicle, you may want to try and get a co-signer who has good credit. Their good name and credit history can help you get the loan and build your credit at the same time.
- Again, we want to iterate the most important thing about maintaining good credit and raising your credit score: MAKE YOUR PAYMENTS ON TIME! And use credit sparingly.
There are a lot of great tools available online to help you with credit and making credit decisions. Go to
www.myfico.com and check out some of their calculators. Since FICO is the company who assigns you that magic little number that is your credit score, they are a great source of help for the consumer. At this site, you can find out:
- Which loan is better
- How much your mortgage payments will be
- How much money you can afford to borrow
- Whether or not you are better off refinancing a loan
- How much refinancing costs will be
- Whether or not you should consolidate your credit cards
- How long it will take to pay off a credit card balance
- How rate changes will affect your loan balance
- And much, much more!
You can also find many other websites that can help guide you through not only the credit process but how to get and maintain a solid credit score and rating.
Last, but not least, don't forget the three major credit card reporting agencies. These are the places you should start to obtain your credit report and get on your way toward better credit.
