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How To Improve Your Credit
There are several things you can do to improve your credit. Keep in mind it usually takes one full year of good credit behavior to see a significant change in your credit rating. This means you should exhibit a full year of responsible credit behavior -- specifically, conservative use of credit, paying on time, and not requesting too much credit during a short period of time.
Below are some general tips on how to improve your credit history. Follow these tips and over time, it will improve your credit.
- Review Your Credit Report. You should first get a copy of your credit report. You have to know what's there before you can make it better. There are three major credit reporting agencies:
It is recommended that you get all three or a consolidated credit report. By making sure that only your accurate credit history appears on your report, you ensure that the credit score it generates isn't lowered by inaccurate information. You should check your report about once a year.
- Correct errors on your credit report. If you find any mistakes on your credit report, complete the request for investigation form that came with your credit report or type a letter describing every problem. Send your letter to the address provided by the credit-reporting agency for disputing information. Enclose copies of any documents you have that support your claim. Corrections you make to your report takes 30 days to take effect.
- Add information showing stability. Creditors like to see evidence of stability in your file. Add things like current and previous employment information, current and previous addresses and date of birth. Credit reporting agencies aren't required to add this information, but they often do.
- Avoid unnecessary inquires. Every time you apply for credit, or your credit report is accessed for another reason, that fact will be listed on your credit report as an inquiry. Many inquiries make it appear that you are shopping for credit, which indicates that you anticipate the need for many lines of credit.
- Close unneeded accounts. The less available credit you have, the less risk you will pose to a potential creditor or lender. Keep around two to four credit cards for the best score. Close all unused or unnecessary accounts.
- Build a great payment history. It goes without saying that paying your bills on time is the key to a great credit rating. While there's not much you can do to remove accurate late payment information, you can start making every single payment on time from here on out.
- Pay off credit cards. This shows you use credit wisely and aren't spreading yourself thin. Keep your credit limits and outstanding balances down. Conservative use of credit is important.
- Keep your debt reasonable. One rule of thumb: for a good credit score, your account balances should be below 75% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1500.
- Take care of collection accounts and public records. Make sure collection accounts are paid and listed as paid on your credit report. You may be able to negotiate a reduced settlement with the collection agency to get a debt paid, but there may be consequences. Also, satisfy any public records, such as tax liens or judgments.
For more information on how to fix you personal credit report, call us to schedule a one-on-one, confidential credit session with a professional loan officer at (502) 459-3000 outside of Louisville at (800) 292-9490. You can also sign up online by clicking here.