As you’re working on your list of New Year’s resolutions, you may want to add a resolution to improve your credit. After all, improved credit provides you with many benefits, such as making it easier to buy a car or helping you get lower interest rates on a home loan. Although it can take a lot of time to eliminate the damage from big credit mistakes, you can take some small, simple steps to improve your credit. Combine these steps together and you’ll definitely improve your credit.
1 – Make Sure You Pay Bills on Time Each Month
One of the easiest things you can do to improve your credit is to make sure you pay your bills on time each month. About 35% of your credit score is reflected by your payment track record. If you continue paying your bills late, your credit will go downhill. If you have a tough time remembering to make payments, use automatic bill pay or set up reminders so you don’t forget.
2 – Work on Reducing Your Debt
Work on reducing your debt to improve your credit. Your debt-to-credit ratio has a big impact on your credit score, and a smaller percentage is better. Your goal should be to only use 20-25% of your available credit. If you’re using more than that, you need to start paying down those debts. Try to find ways you can increase the amount you’re paying on your debts. As you decrease your credit balances, you should see an increase in your credit score.
3 – Check Your Credit Report for Errors
Unfortunately, errors often occur on credit reports, and an error can negatively affect your credit. Make sure that you check your credit report at least once each year for errors. Errors to look for include:
Accounts that have the wrong credit limit
Accounts that have the wrong account dates
Addresses where you’ve never lived
Accounts that you did not open
Negative information, such as late payments, that are older than seven years
Social security numbers or names that aren’t yours
4 – Keep Old Credit Accounts Open
Many people pay off a credit card and then close the account. That could actually hurt your credit by reducing the amount of available credit you have. Consider keeping older accounts open. They’ll keep your debt-to-credit ratio looking better and they’ll show that you have a long credit history. Just don’t give in to the temptation to overuse those accounts once you pay them off.
Avoiding credit problems is the best option, but if you have made some errors, you can clean up your credit by using these helpful tips.