An Action Plan for Building Your Credit Score
With lending restrictions and employment options tight, now is the perfect time to work on improving or maintaining your credit score. Below are some quick tips that can help you manage your credit effectively so you have the credit you need when looking for employment, purchasing a home or simply want to make sure you qualify for the best rates for any loan.
- Open a checking and savings account at a bank or credit union, manage your accounts carefully and never bounce checks. This is the initial step to take to start proving your credit worthiness.
- Get a copy of your credit report from all three of the major credit bureaus once per year and check the accuracy of your reports. If you find discrepancies, follow the directions on the report and dispute them with the credit bureau. There may be inaccuracies on your credit reports and it is up to you to monitor them. You are entitled to one free copy of your report from each bureau once per year. Go to www.annualcreditreport.com or call 1-877-322-8228.
- Pay all of your bills on time, every time. Your payment history accounts for 35% of your credit score and it only takes one missed payment to hurt your score. Set up automatic payments when possible and keep a calendar of due dates and a payment reminder system.
- On your revolving accounts (credit cards) keep the balance you owe under 30% of your credit limit. One more thing; paying your bill in full each month is the smartest way to use credit and will have the greatest positive impact on your score.
- Be sure that your lenders are reporting your credit limits accurately. If the limits are too low, it can affect your score. Remember the 30% rule!
- Do not apply for more credit if you already have open, unused credit lines. Also, do not open new accounts simply to pay off existing accounts. Opening several new accounts can cause your score to drop.
- If you do not have a credit history and are trying to build one, consider a secured credit card, but shop carefully! The lender will require you to deposit money up to the credit limit. Try your own bank or credit union first and make sure that the card you pick:
- Has no (or a very low) application or annual fee
- Converts to a regular unsecured credit card after 12 – 18 months of on-time payments
- Will be reported to all three credit bureaus. If the issuer does not report to the credit bureaus, the card will not help build your credit history
- Keep older credit card accounts open. *One thing you shouldn’t do if you’re just trying to boost your score is close unused accounts, says Craig Watts, consumer affairs manager for Fair Isaac Corp. “If someone tells you to close unused accounts to improve your score, they’re pulling your leg,” he says. “It won’t help you and it can hurt you.”
- Be patient. It takes time to build or rebuild credit. Continue paying all of your debt on time, and if you are behind on accounts – get current.
- Look for help if you feel overwhelmed. Credit counselors can help you put together a plan to manage your credit. You can find a credit counselor by contacting the Association of Independent Consumer Credit Counseling Agencies by visiting www.aiccca.org, or calling them at 1-866-703-8787.
*Curry, Pat. 2007 August 3. Tips for Boosting Your Credit Score. Bankrate.com. Retrieved from http://www.bankrate.com/finance/credit-debt/tips-for-boosting-your-credit-score-1.aspx.
Published Oct 14, 2009.