Fixing your credit score might seem like an impossible task. It’s not. Yeah, it takes time for your credit score to make a full recovery. But, adding 50-100 points can happen relatively quickly. Here’s how.
Step #1: Know Your Current Credit Score
It’s pretty hard to improve your credit score if you don’t know where you stand. Before you do anything else, you need to know your current credit score.
To get a good idea of where you stand, try getting a free credit score from Credit Sesame. (Yep, I said FREE!) Signing up is easy and you’ll also receive free monitoring and alerts whenever something changes. With that being said, the free version only monitors your TransUnion credit report. They also offer a premium option that monitors reports from all three credit bureaus as well as monitoring your social security number, public records, and black market websites.
Free credit scores are great, but they aren’t the “real” number that banks use to make lending decisions. To do that, you’ll need to check your FICO score through MyFico. For $29.95 a month, you’ll have access to identity theft monitoring as well as monitoring and tracking all three FICO scores from your credit bureau reports. You also receive a copy of all three credit bureau reports each quarter. Speaking of credit reports…
Step #2: Check Your Credit Report
Did you know that you’re entitled to 3 free credit reports every year? It’s true LeFou! Each of the three major credit bureaus are legally required to provide you with a free copy of your credit report once every calendar year. And, since there are three of them, you can check one bureau’s report every four months.
So, before you go any further, go to AnnualCreditReport.com to get your copy. Comb through that sucker and check for any errors or marks against your credit that you didn’t know you had. Dispute any errors, and negotiate to settle past-due accounts so that they don’t count as a mark against your score.
Step #3: Pay On Time
To improve your credit score, you’ll need to fix your current credit problems. Unfortunately, it may take some time.
Your credit history accounts for about 35% of your credit score. So, if you’ve had problems paying your bills on time, now is the time to fix that. Get current on any bills that are past-due. Then, stay current. Make sure to pay all of your bills on time from this point forward, and your credit score will gradually start to improve.
Step #4: Get a Secured Credit Card
If you want to build credit, you have to use credit. In addition to credit history, credit utilization makes up a huge chunk of your credit score (30%). So, what is credit utilization? It compares how much credit you are using compared to how much credit you have available. Thus, the more credit you have available and the less you use, the better.
Of course, getting gaining credit when your credit score is low can be tough. You have to take it anyway you can get it. So, one of the best ways to get a line of credit is to open a secured credit card. Basically, a credit card company will extend a line of credit to you provided that you put down a security deposit. By using your card in small increments and paying it off in full every month, you’ll prove that you can handle credit responsibly. Before long, you’ll see your credit score increase, and then you can jump for joy!
The Best Secured Credit Card for 2016
Discover it® Secured Credit Card
There are dozens of secured credit cards available, but none is better than the Discover it® Secured Credit Card. With no annual fee, the Discover it® Secured Credit Card actually allows you to earn cash back while you build your credit. You’ll earn 2% cash back on the first $1,000 in combined purchases at grocery stores and gas stations each quarter. For everything else, you’ll earn a nifty 1%. Plus, Discover will match all the cash back you’ve earned at the end of your first year, doubling your cash back total!
But that’s not all.
Discover knows you’re trying to improve your credit score so they’re willing to help. Not only do they report your responsible use to all 3 major credit bureaus, they also print your FICO® score for free on your monthly statements. Your minimum security deposit of $200 is eligible to be reviewed for a refund after 7 months. Frankly, with these benefits, we think this is easily the best secured card around. Read here for more information!
Step #5: Wait It Out
You didn’t get into credit problems overnight, so you can’t expect them to be cured in a matter of minutes. You’ll need to wait at least 30-60 days to start seeing improvements. In the meantime, keep paying those bills on time and building your credit score will take care of itself!
Have you had success improving your credit score? What tactics have you used?