Financially-speaking, there is no more important document than your credit report. This report details your financial history and will be a large determining factor in a lender’s decision to work with you. A cleaner credit history usually entails a higher credit score, a figure that is essential to getting loans with decent interest rates – or getting loans at all. If your credit score has taken a hit from past misfortune or mismanagement of credit, know that improving it will not happen overnight. It will take some time for you to clean up your report, but it can – and should – be done.
Get a Copy of Your Credit Report
The very first thing that you need to do is to obtain a copy of your credit report. This allows you to see what areas of your financial situation needs improvement the most. You can also identify any errors that are present on your credit report and get them cleared up promptly.
Keep Credit Card Balances Low
Revolving credit like credit cards impact credit scores substantially, so the goal is to use only a small percentage of the credit that is available to you. Ideally, one shouldn’t have a credit card balance that exceeds 30% of the card’s limit, as a general rule. Keep your credit card balances small and pay them off frequently to improve your credit score.
Leverage Your Assets
If you own a home or some other property you can obtain a private second mortgage and use the proceeds to pay down your balances and other delinquencies. This will boost you credit score and help you begin the process of rebuilding your credit. Private mortgage lenders typically only look at the value of your asset when determining if you’re eligible to borrow.
Let “Good Debt” Stay on Your Report
Good debts are debts that are paid appropriately and reflect positively on your credit report. Don’t try and get the debt removed from your credit report just because it is paid. This can actually hinder, and not help, your credit report because it will no longer show that you reliably paid off that debt.
Pay Your Bills – And Pay Them on Time
One of the biggest components of a strong credit report is simple, on-time payments in full. This means that monthly debts like your rent or mortgage, utility bills and car payments make a substantial difference when it comes time to report on your credit. Maintaining a strong credit score is really as simple as paying your monthly debts in full and on time.
In general, playing with money that you don’t have will hinder your credit report and drive down your score. Taking on no greater debts than you can afford to reliably pay back is essential to improving your financial standing and cultivating a credit report that lenders will be glad to work with.