Once you have your credit report and your credit score, you will be able to tell where your problems (if any) lie. If you see room for improvement use the following information to help develop a plan of attack.
Based on the info in your report:
-Do you have too much debt?
-Too many unpaid bills?
-Are you frequently late paying bills?
-Have you recently faced a major financial upset such as a bankruptcy?
-Have you simply not had credit long enough to establish good credit?
-Have you defaulted on a loan, failed to pay taxes, or recently been reported to a collection agency?
It is important When developing your action plan to know where most of your credit score is coming from:
1) Your credit history (accounts for more than a third of your credit score).
Whether you’ve been a good credit risk in the past is considered the best indicator of how you will react to debt in the future. For this reason, late payment, loan defaults, unpaid taxes, bankruptcies, and other unmet debt responsibilities will count against you the most. You can’t do much about your financial past now, but starting to pay your bills on time can help boost your credit score in the future.
2) Your current debts (accounts for approximately a third of your credit score). If you have a considerable amount of current debt, it may indicate you are stretching yourself financially thin and so will have trouble paying back debts in the future. If you have a lot of money owing right now – and especially if you have borrowed a great deal recently – this fact will bring down your credit score. You can boost your credit score by paying down as much debt as possible.
3) How long you have had credit (accounts for up to 15% of your credit score). If you have not had credit accounts for very long, you may not have enough of a history to let lenders know whether you make a good credit risk. Not having had credit for a long time can affect your credit score. You can counter this by keeping your accounts open rather than closing them even if they are paid in full.
4) The types of credit you have (accounts for about one tenth of your credit score). Lenders like to see a mix of financial responsibilities that you handle well. Having bills you pay regularly as well as one or two types of loans can actually improve your credit score. Having at least one credit card that you manage well can also help your credit score.
The above information is only a general guideline but keeping these areas in mind and addressing each one in your plan will go a long way to effectively and quickly boost your credit score.
Keep an eye out for more tips and tricks coming soon.
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Our recent posts aimed at college students proved to be very popular so we decided to offer some advice for those of you who have recently graduated and are now moving onto the next stage.