10 Simple Steps to Improving Your Credit Score

(This is a guest article by Mike Acheson*)

Most financial institutions use credit scores to help decide whether to lend you money or not. It is very important to have a good credit score if you are looking to apply for a personal loan, credit card, or a mortgage. It can be the single determining factor for many banks and credit card companies.

In the US, the average credit score is somewhere around 650-675 but most banks consider anything above 700 to be a good score. Luckily, there are a few simple steps you can take to improve your credit score.

The first step is to search the Internet to find a free credit report - there are a number of websites that offer this service such as Equifax and Experian.

After you have your report, follow these 10 easy steps to improve your credit score:


  1. Learn how to read your report – It’s important to know how to read the report and to ensure you have accurate information about your starting score. After you have a clear idea of where you’re starting from, you can improve your score from there. Some people already have a good score and don’t need to make any improvements.


  2. Find errors – While reviewing your report, make sure to take note of all your applications for credit and to ensure they are accurate. If there is information that doesn’t belong to you or if there are any other errors make note of this.


  3. Addressing the errors – Once you identify a problem you will want to notify the major credit report companies immediately to get them to amend your report. By law, they are required to look into your claims within a month. If the information you provided is correct they will change your report to address any concerns you had.


  4. Pay any overdue bills – It is important to pay all your missed loan repayments or any bills you may have from an overdrawn credit card. This is crucial. After these bills have been paid, not only will your credit report improve but also you will have the satisfaction of having paid these outstanding bills.


  5. Communicate with your creditors – Contact your creditors after sending your payments so that they can update your information immediately – otherwise it can take a few weeks.


  6. Stop relying on credit – Taking on credit is a dangerous path for most people – your debts can spiral out of control quite easily. If you’re trying to improve your credit score then don’t take out any more credit. It’s as simple as that. Credit cards and loans will only make the problem worse.


  7. Ask about payment plans – Many creditors accept payment plans with their debtors. The main purpose is to allow you to catch up on your remaining bills but it also helps you gain control of your finances and to create good spending practices. Living within a budget can be a rewarding challenge.


  8. Adjusting the frequency of your payments – When paying back debts, divide your monthly payments into weekly or twice-weekly payments. This will make your bank records show that you have made extra voluntary payments. The computers will register extra payments, which can increase your credit score significantly. This method of repayment also helps you not fall behind on your payments in the future. If you pay off all your debt then you wont have to worry about any of this.


  9. Self-Debt Management – It’s likely that a debt management company will take a lot of your money but you can often set up your own plan to help pay back your debt. Search the Internet for do-it-yourself debt management strategies and start budgeting. With a little hard work you can pay off your debt in no time and have a sparkling credit report. It’s not easy but it can be done.


  10. Don’t be tricked – A lot of companies and websites promise instant credit repairs and improvements but they are often trying to take advantage of you.


The best thing you can do is work on your credit score at a pace that works for you. You might not be able to make all your payments right away but chip away at your payments and you will see your credit score improve – all it takes is hard work and a little foresight. Good luck.

*About the author: This post was written by Mike Acheson, who writes about debt and life cover in Canada.

*Image Credit: Photograph by kevinzhengli [via Flickr Creative Commons]

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7 Comments:

Tamara Holmes said...

If you are considering getting a debt settlement it would be wise to utilize a debt relief network instead of going directly to a particular debt settlement company. The top debt relief networks only allow debt settlement companies into their network who have a proven record of successfully negotiating debt settlements.

Horlic said...

Thanks for the great article. Yap, i agree to stop relying on credit.

Andrew said...

Looks like a great plan but this is going to require a bit of work. But then again nothing comes easy in this life. Then again it depends on one's financial lifestyle. If you think handing everything over to a debt management company would allow you more room to generate more money, then by all means go with it.

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Andrew @ Check Cashing Locations

student credit cards said...

great post! it's really important that you build your credit and earn good points. The main factor to build credit is being responsible in paying off your bills on or before the deadline.

credit repair.org said...

Great tips collection. I think the most important step is to stop relying on credit. Once you start using less of your limits your score will go up. Another thing which helps with accounts with not enough history is getting an installment loan. Often you will get denied for one even though you may have the money already in your bank account. What you can do is get a secured installment loan which freezes the money in your savings until you replay the loan. In reality it's using your own money and getting charged for it but it does wonders for your credit score.

Jane said...

I think good credit score metter is related which bank you work with.

Steve said...

Hi, I would be very careful looking at a debt management company. There are some good ones around, but also a lot of cowboys. Very often they will damage your credit score and not freeze interest payments. This is a path to disaster when you debts can actually increase rather than giving you a well earnt break to help reduce them. Generally, if you have a sensible buget and no silly outgoings like an expensive car, most creditors will try and help you through get through a difficult patch. A bolshy debt management company does not always get the same response....