What causes bad credit? Late payments, charge-offs, defaulting on loans, foreclosure and bankruptcies are some of the things that can ruin your credit. An unpaid judgment can also cause your credit score to drop to the point where even an easy personal loan isn’t so easy to get. Dealing with bad credit can be frustrating. Fortunately, there are ways that you can keep your credit score high.
How to Improve Your Credit Score
Check Your Credit Report
It is estimated that 20 percent of people have at least one error on their credit report. If you have a low score, then it may be due to errors on your credit score. That is why it is important to obtain a copy of your credit report. Keep in mind that you can get one free report each year. If you have errors, then you will need to report them to the credit bureaus as soon as possible.
Watch Your Credit Card Balances
A credit card can make or break your credit score. If you keep your credit card balances low, then you can increase your credit score. Paying on time can also boost your credit.
The optimal credit utilization percentage is 30 percent. This means that if your credit card limit is $1,500, then your balance should not be above $500. You can keep your balance low by making multiple payments throughout the months. If you are getting close to the 30 percent limit, then you can ask for a limit increase.
Leave Old Debt on Your Credit Report
Many people remove items that they have paid off from their credit report. However, it is a good idea for you to keep these items on your credit report. Keeping items that you have paid off on your report will help you add points to your credit score.
Pay Bills on Time
Your payment history is one of the main things that affect your credit score. In fact, it determines 35 percent of your credit score. That is why paying your bills on time is one of the best things that you can do for your credit score.
It is important to note that one missed payment can drop your credit score. If you have any missed payments, then you will need to pay them off as soon as possible. Ask your bill collectors to delete past-due accounts after you have paid them off.
Be Careful About Applying for New Credit
You can add points to your credit score by having multiple credit cards on your credit report. However, applying for too many credit cards at one time can cause your credit score can drop. Lenders may also consider this a risk. Many people apply for credit cards in order to supplement their income.
Bad credit is a problem that many people have due to things like late payments, past-due accounts, collection accounts and errors. However, there are ways that you can improve it. You will need to make sure that all credit errors are corrected. You will also need to keep your credit card balances low, pay bills on time and leave old debt on your credit report. Additionally, you will have to be careful about applying for new credit.
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