How Can I Repair My Credit Score?

Repairing your credit score should be one of your highest priorities. For the short term, you may have to scale back your current lifestyle. You may have to defer the purchase of things that you want and focus on only the things you actually need. Keep your eye on the big picture. Think of the impact of a lifetime of paying high amounts of interest because of your credit score. You can being repairing your credit score today by managing your finances responsibly. It is never too late.

  1. Pay your bills on time. The number one cause of poor credit is delinquent payments and accounts in collection.
    • a. Be organized, categorize your bills by due date and pay them as they become due.
    • b. Keep a list of bills you must pay every month. If you have wiggle room, try to space them out so you’re not paying all your bills on the same day. Give yourself some breathing room and if possible pay a bill earlier and not wait until the due date.
    • c. Keep all of your bills in one specific location. This way they never get lost or forgotten and you can reference them often.
    • d. Set up automatic payments to coincide with payday. Typically, most bills tend to land within the first and last week of the month. If you know you get paid on certain days, set auto-payments for say installment loans on a schedule.
    • e. Do not fall behind on your monthly payments. This creates multiple problems. Not only will you be subject to late penalties, but, your next payment will be a shorter time away. This is the beginning of chronic late payments, which lower your credit score and ultimately cost you money.
  2. Pay down your debt. When possible, pay more than the minimum monthly payment on your credit cards and installment debt.
    • a. Use any tax refund or bonuses to pay down your high-interest rate debt first.
    • b. One of the most effective ways to come up with additional money is to write down every dime you spend for one week. You will be surprised at how much you spend on things you do not need and how much you can save.
    • c. Prepare a budget and stick to it. You may have to let go of the $4.00 Latte’s every morning and pack a lunch a few days a week, but remember your long-term goal.
  3. Apply for new accounts sparingly. If you are in the position of trying to repair your credit you should not be applying for credit you don’t need. This can lower your credit score.
    • a. Concentrate on paying down the credit that you currently have.
    • b. Multiple credit lines equal monthly payments. This can get your further and further behind. As more and more of your monthly income goes to paying down debt, you have less money to live on. The tendency is to obtain more debt, creating a vicious cycle.
  4. Don’t close paid off or current accounts. Closing accounts that are current and in good standing can actually hurt your credit by eliminating some of the positive history you have worked hard to build.

It is never too late to begin the process of repairing your credit. It is the key to empowering yourself as a consumer.

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