Improving Your Credit Score

Hopefully, you have obtained a free copy of your credit report and made all the necessary corrections to your file. I highly recommend signing up for a credit monitoring program so that you can track your progress in raising your FICO score. If not, Get Your Equifax Credit Report Now! or you can click here to Get Equifax Credit Watch Gold 3-in-1 Now!

If you have bad credit, (under 600), improving your credit score is going to take time, discipline and dedication to make it happen. The days of just adding yourself as an authorized user onto an already established credit card account are certainly over. Recently, the credit reporting agencies have stopped using authorized user accounts in their scoring models. Even if you have fair credit, it will take the same effort to improve your score. Rest assured, it will eventually happen.

1. The first and foremost thing to do, stop spending on credit cards and pay your bills on time. If you have open accounts on your credit report, you must start paying them on time, now. Today is a new day. Sit down and put onto paper your monthly budget. Write down every bill that you have, when the bill is due and the amount due. Get a calender/day planner and write in on each date what bills are due. Then pay them by that date. Paying your debts on time is the foundation to improving your score. If you don't pay your bills on time, you're not going to improve your score.

2. If you have open open credit cards, hide them from yourself! Take them out of your wallet and put them in a safe place. Not carrying your credit cards will save you from those impulse purchases. Whatever you do, do not cancel the cards, ever. Cancelling your credit cards will lower your credit score and defeats the whole purpose.

Another important issue concerning credit cards is the ratio between what your high credit limits are verses your balances. If your high credit on a given credit card is $1000.00 and your balance is $998.00, your ratios are going to be too high and that lowers your score. Start to eliminate your debt by paying off the open credit card account that has the highest interest rate. If you're past due, call the credit card company and work out a repayment plan. Most credit card companies will work with you to get your account current. Be nice when you call them, you want their help. Once that card is paid off, move onto the next credit card account with next highest rate. As you lower your credit card balances, your score will start to improve. You also are getting out of debt at the same time. If you have credit card accounts that are closed, even if it's been a long time since you've paid a dime, start sending them a payment and get them paid off. The last thing you need while you're trying to improve your score, is new credit judgements on your credit report. Once a collection agency is awarded judgement against you, they can seize your bank accounts and garnish your wages to collect on the debt.

3. If you have bad credit and you don't have any open credit cards, here's the bad news, you need to get a couple credit cards. I know this sounds horrible, but you have to do it. This is especially important if you are coming out of a bankruptcy. There are many companies out there that issue credit cards to high risk consumers. If you Google search bad credit credit cards, you will find many opportunities. Do not, I repeat, do not apply for several credit cards! Apply one at a time. After 2 or 3 tries and you are not getting approved, STOP. Do not apply for multiple credit cards. Applying for multiple credit cards will adversely affect your credit. I recommend Capital One, Orchard Bank, New Millennium Bank or First Premier.

4. If you aren't having any success, you will have to get a secured credit card. Typically, you will have to deposit money with the issuer and your credit limit will be based on the amount that you deposit with them. Usually the minimum amount is $300.00 and that would also be your credit limit.

Be prepared to pay very high interest rates and fees on these credit cards. It's the price you'll have to pay for not having a good credit score but it will be worth it in the long run. Once you've received your new credit cards, either secured with your funds or not, make a very small purchase to activate your card then pay the balance in full when you get your bill. At this stage in the game, it is imperative that you pay these accounts on time. Make sure you remove your cards from your wallet and put them away in a safe place.

5. If you are a full or part-time student, a good option would be to apply for a Student Card. The good news is, you don't even have to attend a major university. Many issuers will consider students of community colleges and online colleges. I recommend Discover, Captial One and Citi for these type cards.

6. An excellent way to re-establish your credit is to get an auto loan through a franchise dealer. Find a dealer that has a separate Special Finance Department. Call and ask the receptionist specifically if they have a Special Finance Department separate from their Primary Finance Departments. Dealers will go the extra mile to get you approved. Dealers that have departments that handle credit challenges will have a wider variety of lenders that accept severe to moderate credit problems. Expect there to be limitations to what you will qualify to buy as well as higher interest rates.

7. Another important move, is to start paying off your collection accounts. Take your credit report and write down all the collection accounts that you have. Let's say for example, you didn't pay your $235.00 gas bill at the apartment you lived in last year and they turned your account over to a collection agency. Call the collection agency and find out what they will offer you in discount to pay the account in full. Offer them $100.00 to clear the account as paid. They just might accept the offer or they will counteroffer. You can expect to get 50% off the amount owed in most cases. After you've worked out a deal with them and paid the account off, be sure to get a letter from them stating that they are paid off. When you get the letter, send a copy to each credit reporting agency and ask them to report the account balance as zero.

8. If you have more than one student loan that you are making payments on or not, I highly suggest that you consolidate your loans into one payment. This will help you pay your student loan debt off much quicker as well as free up more of your disposable income that you can use to pay off other debt. Click and Consolidate College Loans Online with Student Loan Solutions.

Be careful obtaining new credit. If you are deep in debt and are applying for a new account, the lender may consider you to be over extended. Your debt to income ratio is a very important factor when obtaining credit. Don't just get new credit accounts in effort to increase your score and not pay on time or pay off debts. That tactic most definitely won't work to improve your credit.

If you have any questions about how to obtain credit, feel free to email them to me at kreynolds02000@yahoo.com or post a comment on my blog.