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Complete Guide to Improving Your Credit in 2019

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The only good thing about having bad credit is that it’s possible to raise your credit score! It’s not something that stays static once you reach a certain level, thank goodness! Check out our tips below if improving your credit in 2019 is on your list of resolutions!

Guide to improving your credit in 2019

Your credit score has such a huge impact on so many things in life. Whether you’re wanting to buy a car or a house, or even get approved to rent an apartment, your credit score will be pulled.

Complete Guide to Improving Your Credit in 2019

Oddly enough, too many hard pulls on your credit will lower your credit score, so be mindful when you are applying for loans. Ask whether it will be a soft check or a hard check and if you’re at a car dealership make sure they aren’t pulling your credit 17 times (yes, that happens when they’re trying to find a lender for those with lower credit). While multiple inquiries in such a short time period aren’t supposed to affect your credit, they can.

Order a free copy of your credit report and dispute inaccuracies

You can request a free copy of your credit report once a year from annualcreditreport.com. Go through your report from each bureau with a fine-toothed comb. If you notice any inaccuracies, dispute them right away. Here’s a detailed article on how to dispute errors on your credit report.

Make a plan to improve your credit

You’ve seen your credit report, now it’s time to map it out: how are you going to fix your credit? I figure if you knew the answer to this question already you probably wouldn’t be reading my post, huh? So let’s talk about it. What needs to be fixed first, and how do you go about it? There are a few different schools of thought on this, but from experience, I’m going to tell you mine.

Disputing errors on your report is the first step. Once you’ve done that, make a list of your debts. Call each creditor and ask for a payoff amount. If it’s been in collections long enough, you may owe $20,000 and get a payoff amount of $2,000! If it’s new to collections, request a payment plan so you can start working towards getting the debt off your credit report. The problem with payment plans is that the debt will remain on your credit until you’ve paid it off. So if at all possible, pay the debts off in full.

Next, get a secured credit card and use it responsibly. This will help build your credit as you make a payment each month. Keep your overall credit usage around 10%, just in case something happens and you can’t pay the balance off in full that month. Going above 30% usage may negatively impact your credit score.

Get a secured credit card

If your credit isn’t good enough for a regular credit card yet, get a secured card. You can get a secured credit card from your bank or local credit union, or online through CreditKarma. Say you get a $500 secured credit card. That means you have to pay $500, but you have that $500 as a credit line to use (and payback) each month. Use it for gas or groceries, or a smaller household bill like water. Be sure to pay the credit card off in full each month. Leaving an outstanding balance is a bad habit to get into and will not help you increase your credit score.

Keep an eye on your debt to credit ratio and keep your credit utilization low. Like I mentioned before, keeping it around 10 percent is perfect. Going above 30 percent can negatively impact your credit score and as you know, it takes a lot longer to build your score up than to tear it down. Keeping your credit utilization low is one of the easiest ways to keep your credit score on track.

Don’t co-sign

As your credit improves, you may be tempted to co-sign for a loan for someone to help them out. Don’t do it! Unless you are 100% okay with being solely responsible for that loan, just say “no” to co-signing. I know it’s tempting to help a friend or family member, but you have to work on improving your own situation first. Beware of things like this that could set you back if the deal goes south.

Don’t close accounts

You may be tempted to close credit card accounts after you’ve paid off the balances, but don’t. Get rid of the cards if you don’t want to use them anymore, but leave the accounts open. This will help you have a higher available credit limit and shows your credit history age. If you start closing accounts, your score could drop because of lack of credit history.

Protect yourself from identity theft.

Identity theft is fairly common, and a huge mess to clean up. If your identity is stolen, it can take a while to get everything cleared up. In the meantime, you’re dealing with negative bank account balances and hit after hit to your credit report. While you can’t completely protect yourself from identity theft, there are a few things you can do to make it harder for the bad guys to get ahold of your information.

Be cautious when sharing your account or card information online, especially when you’re connected to Wi-Fi in a public place. Use a VPN to protect your information (a VPN encrypts your data).

Don’t leave your mailbox unlocked! While a mailbox with a key may seem like a bit of a hassle, you will wish you had taken the extra step if your information is stolen that way. It takes a few extra seconds every time you check the mail but is definitely worth the peace of mind it provides.

When it comes to identity protection, taking a proactive stance isn’t a bad position! Companies like TransUnion will monitor your credit for you (for a small monthly fee) and let you know if anything seems amiss. For instance, if anyone tries to take out an auto loan in your name, TransUnion will let you know ASAP.

If you’re a victim of identity theft, close your accounts and notify all creditors. Also, notify your bank and the FTC.

Restating the Obvious: Improving your credit in 2019 takes work

You already know these things, but they’re worth repeating because they’re crucial to improving your credit score (and keeping it on track once you’ve gotten it to where you want it).

Always pay your bills on time

Set up automatic payments on the bills you know you will have money in your account for each month. This prevents late payments but can be risky if your bank account has a low balance. If you can’t make a payment for whatever reason, call your creditor and ask about payment plans, deferments, or any other options to prevent a late payment from being placed on your credit report. While they won’t always be receptive, the chances of you getting assistance are higher if you make a phone call ASAP instead of waiting until the bill is already 30 days late and headed to your credit report!

Be patient

Though your credit can be destroyed in an instant, it can take a long time to build up! If you increase your credit score by 100 points in a year, that’s good. By 200 points in a year, that’s great! It can be incredibly frustrating when your score drops for what appears to be no reason at all because it will drop 20 points and then only go up by 5 points. It’s kind of like weight loss: look at the overall trajectory of the number rather than the number day to day. It may be a wiggly, windy path but it will all even out in the end if you’re following the steps outlined in this post.

Pay off debt

If you’re drowning in high-interest credit card balances and over the limit fees, you may want to consider a debt consolidation program. Beware of scams! Do your research before signing on with any program, and check the fine print. A good debt consolidation program will help you organize your debts in one place, and create a plan to pay them off. You’ll get lower monthly payments and less stress!

If you choose to refinance your loans, make sure the bank you work with is FDIC-insured.

What’s the endgame?

Building credit isn’t always easy – especially if you are rebuilding after some major damage has been done. No matter the reason your credit score was low in the first place, keep your endgame in mind. Having goals to look at daily will help prevent you from using credit cards for useless shopping sprees. Think about “why” you want to build your credit: to buy a house, a car, or to get a better interest rate? Whatever the purpose, keep your eye on the prize and before long you’ll be in the 700 (or 800!) club!

 

While I haven’t read the book or followed the plan, I know quite a few people who swear by The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey. If you’re really serious about improving your credit in 2019, this book might prove to be just what you need to whip your finances into shape!

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