Tips to improve your credit score and repair your credit

Tips to improve your credit score and repair your credit

• Tackle one debt at a time, starting with those that carry the highest interest rates. Those typically are retail store cards. Retire one balance at a time while keeping up with minimum monthly payments on your other cards. Where rates are the same, I like to start by retiring debts on cards that have the lowest balance. That way, you see quick results and build momentum. Besides, carrying a balance on a credit card that has a low limit can lower your credit score.
• Automate your payment schedule through a recurring online payment system or by authorizing a creditor to debit your account each month. Once it’s automatic, you never miss a payment and simply get used to living on what’s left.
• Beware simple solutions. Consolidating debt in a low-cost loan makes sense. But make certain you apply all of your interest savings along with your total former payments. Consolidating in, say, a home equity line of credit can backfire if you only pay the interest. Make sure you are paying down the loan balance as well.
• Create a budget now. The New Year is a great time to take a fresh look at monthly income and expenses and identify where spending can be curtailed and where savings can be enhanced.
• Start paying your bills electronically. Stop writing bills by hand, buying stamps and licking all those envelopes. Late fees and missed bills are a thing of the past with the help of your bank’s own website.
• Ask for help. Your credit card issuer may lower your rate just for the asking, or at least tell you what you must do to qualify for a lower rate. Card companies don’t want to lose you to a competitor. But you have to ask.
• If you are inclined to seek credit counseling, do it now—before you have made an expensive mistake (like cashing in a retirement account or maxing out a home equity line of credit).
• Finally, if you are in the market for something expensive that you’ll have to finance, like a car or home, check your credit report to see how much damage your holiday shopping has done. Fix it before applying, and you’ll almost certainly get a lower interest rate. Order your free personal credit reports from Equifax, TransUnion and Experian at www.annualcreditreport.com.

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