Most people understand how important it is to keep a good credit score but many people might have difficulty trying to improve their credit report. In fact, though, this is something that you can do over time if you simply pay attention and implement a few key strategies.
First of all, you should always take advantage of the fact that you get an annual credit report for free. This allows not only for monitoring of your own activities but will also ensure consistency and accuracy of your information. Still, this is not necessarily enough information to get an accurate forecast on your credit because there are three credit reporting agencies.
Clifton M. O’Neal, senior director of corporate communication for TransUnion says
It is important to remember that consumers have more than one credit report. Since there are three different credit reporting agencies, the information on each of their credit files may different.
Thus, he says, requesting a free annual credit report “can help consumers keep tabs on all of their financial activities.”
Secondly you should always know that what you do today will affect your credit in the future, so it is important to be mindful of your credit behavior and take small steps to improve it as often as you can. According to Russell Wild
If you are going to be applying for credit at any point in the future-whether a new credit card, a montage, a home equity line of credit or a small business loan-your credit score will largely determine how little or how much you are going to have to pay for that credit… if you get it at all.
Wild is a certified financial adviser and co-author of “One Year To An Organized Financial Life.”
David Jones, president of Association of Independent Consumer Credit Counseling Agencies, addressing another important strategy: “Most people don’t bother reading the terms and conditions, and that’s a mistake. You shouldn’t be surprised when your interest rate goes up because you missed a payment. It’s all there in black and white.” Of course, it doesn’t help that credit card agreements are often quite difficult to understand. The 2010 Wall Street Reform and Consumer Protection Act, a new Consumer Financial Protection Bureau, however, might change this.
The Credit Card Act of 2009 requires credit card companies rephrase their design and disclosure statements to be more clear and they are, indeed, much easier to understand than ever before. This is where you will find important information regarding fees and payments.
Jones also makes it a point to note “As soon as the January bills come in and cardholders realize how long it’s going to take them to pay off their holiday spending, paying down credit card bills becomes a priority.” This goes hand in hand with another mandate established by the CARD Act, which provides cardholders with this timeline on their monthly statements. The more you know about your projected payoff date, the better you can manage your finances to pay your card off sooner.
Another key strategy to successfully raising your credit score is to use cards that support your spending habits. A great deal of the reason you spend money is based on your personal needs so it is a good idea to use cards that reward your particular proclivities. Obviously, you will want one with a good interest rate, but also pay attention to payment due dates, annual fees, and even the auxiliary or rewards benefits.
Finally, the most overlooked credit-report-improving strategy is to take your time closing credit accounts. As Jones puts it,
Any major change in your credit habits, including canceling cards, will throw up a red flag and impact your credit score. If you want to reduce the number of cards you carry, cancel one card and a few months later cancel another instead of canceling them all at once.