How to Fix Your Bad Credit Rating
For most people, having good credit is like a key to open up lots of doors. With good credit, you can usually get a car loan easily, be offered credit cards and be able to receive the lowest rates on mortgages. With a poor credit rating, you will usually have to pay more to borrow money and in some circumstances can even be denied a loan. If you have a poor credit rating or even no credit rating, here are some tips on how to work towards a good rating.
Request a Current Credit Report from the Big 3 Reporting Agencies
One of the ways to start fixing your credit rating is to first examine your current score. New laws enacted make it easy for you to request a free or low cost credit report from the big three reporting agencies. They are TransUnion, Experian and Equifax. You can easily visit their websites to request a current credit report. Within the credit report it should list all of your outstanding loans, whether or not you have been late on your payment, how much your remaining balance is and any delinquencies you may have. It should be noted that there are products now where you can request your current credit score.
Using this information, you can figure out just how bad your credit rating is. For those with moderate scores, you can easily increase your rating with a few tips. If your credit score is very poor, it will not only take longer, but require much more work to build a high credit score.
Tips to Improve Your Credit Rating
Here are a few tips to improve your credit rating. First off, make sure all information on your report is accurate, if not make sure you contact the big three reporting agencies to report any mistakes. Another tip to increase your credit rating is to lower your debt. The more debt you have, ultimately the more risk you are to lenders. Look at your debt to income ratio. You should not have debt more than 20% to 30% of your yearly income (not including your mortgage or student loans). By lowering your debt to income ratio, you should be able to easily increase your score.
Another tip is to decrease the amount of credit cards or loans you have outstanding. While one to three credit cards is the norm, anything more and you might raise red flags. Even if you have no balance on your cards, the ability to instantly lend tens of thousands of dollars from a variety of credit cards you hold scares lenders.
