Financial mistakes such as paying bills late or amassing too much credit card debt can have a detrimental effect on your credit score. Luckily, the credit repair process can turn the situation around. Performing the following four steps can help improve your credit rating.
1. Pay Off Credit Card Balances
Carrying a balance on credit cards packs a heavy punch on your credit score. Financial experts use to a “credit utilization” ratio to determine how high of a balance is acceptable. The ratio compares your full debt balance with the amount of credit available to you. Outdated recommendations focused on a magic credit utilization ratio of 30 percent, but this is no longer cut in stone. A more effective credit repair process involves paying off balances as much as possible.
2. Maintain Credit Cards
Going along with the credit utilization ratio, you should resist the urge to cancel unused credit cards. Canceling credit cards reduces the total amount of credit available, which can have a negative impact on your credit utilization ratio. Instead, keep credit card accounts open and use them occasionally, always paying off the full amount charged each month to avoid interest.
3. Pay Bills Promptly
Paying bills on time is always a part of the credit repair process because this indicates responsible financial activity. Payments that are late, even by a day or two, can be a red flag to a company assessing your creditworthiness. Companies are likely to report a history of late payments to credit bureaus, which means that this information can negatively impact your credit for seven years.
4. Avoid Telltale Activities
Some financial activities suggest money problems, which could signal red flags to lenders. To improve your credit score, avoid activities such as increased charging, paying less of your balance, carrying over a balance, and missing payments.
Although the credit repair process doesn’t happen overnight, you can improve your credit score with a steady focus on responsible financial management.