How to Improve Your Credit History

In a world where cash is virtually non-existent, or perhaps rather exists virtually, it’s easy to lose track of how much money we owe to whom, and when it’s due. Credit card receipts pile up, telephone bills flood our inbox, and overdue notices often get ignored. While deferring payments, or avoiding them altogether, may keep your bank balance from overdraft, the reality is it could be detrimental to your future financial undertakings.

From applying for a credit card, to leasing a car, to securing a mortgage – whenever a major outlay of money is, or will be required, the creditor will be looking to ensure that you are equipped to make payments regularly and on-time. One of the first documents they will look at is your credit report. It is in your best interest to review it as well. You can get a free credit report from each of the major credit bureaus (TransUnion, Equifax, and Experian) once a year. Check for potential errors, anomalies, or suspicious transactions, and report them if relevant. If all looks right, but your score isn’t exactly the best, don’t fret. There are ways to improve it.

One of the biggest reasons for a poor credit score is delinquent payments. Try setting up an automatic payment schedule through your bank account or credit card. Mark your calendars, or have your bank send you reminders, if this service is available. Get current and stay current. If you are having financial difficulties, contact a credit counseling service. They’ll be able to help you manage your debts within your means. You’ll slowly chip away at the money owed and improve your score.

Don’t go overboard on your credit cards. Having one or two is actually good for your score, but the key is to manage them responsibly. Keep balances low and try to pay them off when due, or at very least, pay the minimum payment due. Maxing out your cards can affect your score, as can having a number of credit cards that you don't need. Owing the same amount but having fewer open accounts may actually lower your scores. Generally speaking, carrying a balance of more than 50% of your available credit will negatively impact your score. You could try to increase your credit limit. If you owe $2,500 on a card with a $5,000 limit and increase the limit to $7,500, your ratio instantly improves. However, make sure you don’t use the extra room on your card or you may find yourself in an even worse situation.

There’s no quick fix to improving your credit score. Remember, you can’t change the past, but you do have control of the future.  Follow the above suggestions, and with time and discipline, you’ll see your score improve (and even save yourself some money in the long run by avoiding interest charges and late payment fees).