Do you find yourself in a situation where your credit history is less than desirable, and you need to improve your FICO credit score? If you’re like the majority of Americans, the answer is probably yes.
The median or average credit score for borrowers in the United States is 723, and over 60% have a score of less than 750. That means that most people will have quite a bit of room for improvement. Your credit can't be fixed in a flash, but you can begin laying the groundwork for a gradual improvement over time. Here are 7 things that you can do to start down that path of establishing good credit.
7 Tips To Improve Your Credit
- Get Your Free Annual Credit Report Once a Year: It is important to keep a close eye on your credit. If you have less than stellar credit it can be a painful reminder of that when you check your FICO score, however there are several good reasons to keep tabs on your credit. You need to make sure that your information is all correct, that there isn't fraudulent activity on the card, and that you don't have any open accounts that you had forgotten about. If you do find information that is incorrect, make sure you get it corrected before too much time passes as it can be a stain on your record that can be hard or near impossible to get removed. Get your free annual credit report at http://www.annualcreditreport.com
- Pay Your Bills… and On Time! This one may seem obvious, but it can be one of the major reasons some people's credit isn't as good as it could be. Paying your bills on time means paying ALL your bills, from credit cards and mortgages to secondary things like utility bills, rent and cell phone bills. Most of these secondary bills may not show on your credit history if they're paid in good standing, but when they fall behind, they can start to show on your credit report. Usually this will happen after they are 30 days late. So pay your bills on time every month, and after a year or two your credit will probably start to rise.
- Find a Job You Like and Stay There: When you are in a stable job and you aren't jumping around from employer to employer it shows lenders that you have a stable income, and that you're more likely to be able to repay a loan. Being with an employer for 5 years or more will really begin to improve your chances with lenders. Of course every situation is different, and it isn't always possible to stay at a job for that long, but if you can it will help you in the long run.
- Stay in one place – stop moving around! Just like with stability of your job situation, lenders like to see stability in your place of residence. If you're jumping from rented house to rented house, lenders will often begin to wonder why you're moving around so much. Owning your own home can also be a plus, although if you have bad credit to begin with getting a mortgage may be a bit harder.
- Get a Co-Signer and Apply For a Loan or Credit Card: Sometimes your credit may be a little too dinged up for you to get a loan or credit card by yourself, but you may be able to get a loan with a co-signer. You can piggyback off of their good credit. Use this as a last resort, and make sure you plan on paying back the loan on time (because you don't want to hurt someone else's credit). Try to keep the credit limit small, and keep a positive repayment history, and over time you can begin to establish that good credit.
- Increase Your Income: I know this is easier said than done but annual raises, bonuses and your overall debt to income ratio can be a deciding factor in whether or not you get a loan. If you can find additional revenue streams, get a raise or find other ways of bringing in extra cash, it can really help.
- Decrease Your Expenses and Debt: Even if you're not able to increase your income at this time, decreasing your debt can also be a huge help. Find ways of decreasing your credit card debt, while at the same time not adding to any new debt. Use the snowballing method to pay off your debts one by one. Your debt-to-income ratio will steadily improve, as will your credit.
Remember, none of these tips by themselves can get your credit back to tip top shape without a bit of patience. Fixing your credit takes time, and you need to be in it for the long haul. Your credit wasn't broken in a day, and it won't be fixed in a day either. If you're dedicated to the goal of re-establishing your credit, it can be done. So stick it out!