I know that it can sometimes feel like you have the worst credit out of everyone in your circle. In truth, most people don’t have great credit. In fact, the average score is just 675, which is slightly lower than what most financial experts consider a good score. With student loans still haunting you and collection agencies blowing up your phone, t’s easy to feel like you’re neck in debt and drowning fast. Don’t worry! I’m here to help! Here are 5 great ways to start managing your credit score.
#1 – Learn What Your Credit Score Actually Is
Of course you want to get this credit score taken care of yesterday. However, before we can begin working on your score, you need to know how much debt you’re in exactly and who you owe. It’s important that you also check to see if your debts have been sent to collections or if you have any late payments on your credit report. Request a copy of your report so that you can see exactly where you stand. You can get a free report from each bureau every year from AnnualCreditReport.com.
Then, there are a variety of ways to get both your credit score and your FICO score. You can use free tools like Credit Karma (but sometimes credit card companies might offer a free score as well). After you review your report and score, be sure to follow this guide to disputing errors on your credit report as sometimes errors can account for a low credit scores.
#2 – Beware of identity theft
Once identity thieves have your personal information, they can drain your bank account, run up charges on your credit cards, open new utility accounts, or get medical treatment on your health insurance. In extreme cases, they can file a tax refund in your name and get your refund, or even give your name to the police during an arrest.
The more your credit improves, the more susceptible you are to identity theft, so always be on the lookout. Check your report periodically to make sure that there aren’t any unauthorized accounts in your name. If there is something you don’t recognize or anything strange you notice, contact a reporting agency and have them look at it right away.
#3 – Take Care of that Debt
We all know that high-interest debt can be taxing on both our wallets and our stress level. However, did you know that it can also hurt your credit score? The longer you carry that debt, the more your “utilization ratio” increases which also lowers your credit score.
Sometimes that light at the end of the tunnel is quite dark, but there are several ways to address your debt. Consolidation is one option. Balance transfers is another. However, although both may work for some, the best course of action is one that addresses the debt and gives you a concrete plan to manage your finances more effectively. Look for a Debt Management Program. Do your research and find one that works best for you. As you pay under this program with a concrete plan of action, your credit score can recover at a steady pace.
#4 – Pay Off Anything Keeping You in the Red
Want to pay off your debt fast? The best way to do so is by reworking your budget, trimming unnecessary expenses and boosting your income to free up more cash to put toward what you owe. If you’re paying off debt on your own, without any professional service, then there are two primary ways to get rid of your debt: The first way is to pay off your smallest debts first—which will allow you to eliminate some of that debt quickly and get rid of the stress and anxiety of knowing what to pay first. The second is to pay off your cards and loans with the highest interest rate first—this will save you a significant amount of money long-term, and is most efficient.
#5 – Know That You CAN Request a Higher Credit Limit
This may seem counterproductive, but sometimes a higher credit limit can lower the utilization ratio we talked about before (assuming you won’t be using more credit once you have a higher limit). If you ask to have a higher line of credit, you have to be self-disciplined and avoid using it. This strategy, if used carefully, can help you meet your credit goals and may actually be one of the fastest ways to get the score you want. If you have a higher credit limit and pay your balances down or in full, it can even be more beneficial. Of course, this is up to you, but it’s definitely worth considering.
#6 – Seriously, Stop Stressing!
Having bad credit isn’t the end of the world, and isn’t the end-all be-all to your future and how close you’re able to come to your goals. Millions of Americans are either in considerable debt and/or hold low credit scores, and many of them have been able to pull themselves out of their rut. You can successfully manage your score in no time if you plan correctly, pay down your debt, check for errors, avoid identity theft, and improve your utilization. And remember, I’m always here to help!
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