Improving your credit score is basically about doing the opposite of that which caused you to get a bad credit score in the first place.
If you have bad credit, you got there by making a few bad choices. Perhaps there are circumstances which caused you to fall behind in your debt, but the more likely reason is bad choices. Bad credit happens in a few ways… Not making payment on the debt that you owe to a creditor, late payments or high debt to credit ratio. This last one just means that if you have a $10,000 credit limit and you have borrowed $9,000 against it, you have a high debt to credit ratio. A high debt to credit ratio tells creditors that you are counting on credit to survive and thus are not a good risk.
Bad credit items remain in your name for 7 1/2 years on your credit report and any time you go to borrow money, rent, finance a vehicle, mortgage a house, and virtually anything else that involves the need to check your credit, that you are a credit risk. Two things might happen in this case. You will be denied, or you will be given a very high interest rate. There are few circumstances in which agreeing to a high interest rate are a good decision. Don’t do it.
How do you improve your credit score?
1. Keep on top of what your credit score is each month. You can do this for FREE with Credit Karma. I personally use Credit Karma to keep a watch on what is going on with my credit, while you will find that when you go to a bank, or to finance a vehicle their numbers will differ a bit, but Credit Karma is a great tool to keep a directional eye on your credit score and I highly recommend signing up now.
2. Simply by doing the opposite of what you did do earn bad credit. Start by making regular and on-time payments for all of your debt. You should try not to ever miss a payment, and even if you can’t make the whole payment you should make a payment before the due date. (Here is a great post about paying down debt.) Do not borrow any more money, and do not open a new credit card. You should also avoid opening a store credit card even if they promise a 20% discount “right now”. These are a trap if you are working on improving your credit score. And here is a post on why you most definitely should not fall into the trap of the great credit card offer. (Note that the post was originally written in 2010 so I’m not sure on the actual details of what Target offers now.)
“The safe way to double your money is to fold it over once and put it in your pocket.”
– Frank Hubbard
Over time, history will build on your good habits and you will begin to improve your credit score.
When some get a grasp on their debt problems they are usually hesitant to go back to borrowing again. However, in order to secure a mortgage to buy a house, you need to start rebuilding your credit history. Unfortunately, the only way that that can be done is by proving that you have changed your habits and can meet your responsibilities to your creditors.
Once you have gotten on track with current creditors, and paid down a significant amount of your current debt, should you consider opening new accounts. Because remember… taking on debt without the necessary means is exactly how you got bad credit in the first place.
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Disclaimer: I am not a financial professional and don’t play one on tv. The information provided on Single Mom on a Budget.com is my own opinion and should not be construed as fact or advice, and you follow it at your own risk. You are responsible for your own personal finances and should not rely on this site to make the final decision for you. This blog is my means of communicating my experiences to you and to prompt you to think and consider your own situation, but you are 100% responsible for any actions you take. Always consult an attorney or tax professional regarding your specific legal or tax situation.