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Steps to Improve Your Credit

If you’re concerned about your ability to receive credit, or if you already know that you have problems with your credit, there are steps you can take to improve your credit worthiness.

Get an Accurate Picture
The first step is to see how creditors are viewing your credit, and the best way to do that is to get copies of your current credit reports. 
Once you receive the reports, review them to make sure all of the information is accurate. If you find errors (such as credit cards you don’t have or a debt that appears to be unpaid even though you’ve paid in full), follow the instructions that come with the report to correct the error.

Take Control of Your Finances
Once you have an accurate picture of your situation, develop a budget to ensure that you’re not spending more money than you have. You may have to give up or cut back on some things (such as eating out or going to the movies), but you’ll gradually be able to improve your situation. Most people do not get into credit problems overnight, and it takes a while to recover from them, too.

Repay What You Owe
While it can be a challenge to dig your way out of debt, creditors understand that people can get into tight spots. If someone who owes money works with the creditor to pay it off, the creditor will view that person far more favorably than someone who stops paying and hopes the debt will go away, or declares bankruptcy in the hopes that the creditor will write it off.

Don’t Get Deeper In Debt
If your finances are headed in the right direction, don’t make them worse by digging yourself deeper into debt. Now is probably not the right time to buy an expensive new car, add to your wardrobe, take a cruise, or buy a big-screen TV. Be sure to avoid impulse purchases that give you brief moments of satisfaction and long years of credit payments.

Posted: 3/13/2011 with 1 comments

Categories: Credit, Debt Reduction

Elen Sia
When my husband and I got married in Jul 2005, he readily agreed with me that I should take over the management of our finances. He wasn't doing a horrible job, but when I looked at the details, I realized very quickly things could be better.

Being a new immigrant, I had zero credit history so the first thing we did was add me to one of his credit cards as an authorized user. Then we got a promotional card for me where the interest rate was very high but the available balance was really low. He taught me how credit cards worked in the USA. For six months, all I did with my card was to go to the nearest grocery store once a month to buy $20 worth of groceries. And we paid off the balance in full every month.

When I started getting a good credit score and cards with better terms, I launched a full-blown attack on his credit card balances. I made him choose only one card as his do-or-die emergency card, and I snipped the rest into little pieces in front of him. I then added him as an authorized user on one of my cards because now my credit score was better than his. We also agreed that if it couldn't be paid for with cash, it wasn't worth buying in the first place. In 12 months, we knocked down our credit card debt from $11,000 to less than $6,000. At the same time, the quality of our lives never suffered at all. We never felt like we lacked anything.

Income-wise, we are doing slightly better today than we did more than 5 years ago. But we still pay for almost everything with cash. If we used a credit card (to earn cash back, for example), we always paid off the balance in full every month. Both our credit scores continue to improve.
3/29/2011 3:00:01 PM

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