The Debt Advisor on Bankrate.com had a question about boosting a low credit score. I thought he had some really good suggestions. He pointed out that if you have a low credit score of 500 or less, you’ll find it difficult to get new credit. And if you are able to get new credit it will likely come with a very high interest rate. For that matter, a low credit score can even mean you’ll pay more for your auto insurance.
Stay away from those credit repair services
The article went on to point out that the Internet is full of companies that promise to boost your credit score. He said don’t fall for their blandishments. There is really nothing they can do to help with your credit that you can’t do yourself. The difference is that they’ll charge you to do something you can do free. In fact, here are five things you could do yourself to improve your credit score.
First, get your credit reports
Of course, the first thing he suggested you do is get your credit reports from the three credit reporting bureaus – Experian, Equifax and TransUnion. You can get all three simultaneously at the website www.annualcreditreport.com. Or you can contact each of the three credit bureaus and get your reports from them.
Dispute incorrect items
When you get your credit report and find you have debts that have been charged off, unpaid or delinquent accounts, there is nothing you can do about this. As he put it, the damage has already been done. However, the credit bureaus process literally thousands of items a day. This leaves room for error. If you find that some of the negative items are erroneous, you can dispute them. You will need to write a letter to the appropriate credit bureau disputing the item. The credit bureau will then contact the company that reported the item and ask that it be verified. If the company cannot verify it or fails to respond to the credit bureau in 30 days, the item will be removed from your credit report, which could help somewhat.
Pay off past due accounts that haven’t been charged off
He advised you to pay off any accounts that are past due but that haven’t been charged off yet. This will make the accounts up-to-date and will start to generate some positive information on your credit report. While the negative information will still be there, it should soon be overshadowed by positive information.
Pay balances dues
If you have balances due on any charged-off or collection accounts, he advised you to be sure to pay them. This won’t make an immediate difference but will show potential lenders that you at least paid what you owed – even if you were late.
Pay down your credit card account balances
Another good idea is to pay down the balances on your credit card accounts. If possible you should get those balances down to 30% of your credit limits. If you can’t pay them down that much, you should at least try to pay them down to 50% of your total credit limits. This will give you a better debt-to-credit ratio, which will help improve your credit score. Once you do this, you should pay off all your balances each month thereafter.
Open some new accounts
There is another factor or component in your credit score called Types of Credit used. He pointed out that you can improve this by opening credit accounts in different categories. This will show that you can manage both credit card payments and fixed payment loans. For example, you might take out a small personal loan or an installment loan to buy furniture as this will help add to your credit profile.
The bottom line
The bottom line, according to the Debt Advisor, is don’t fall for those credit repair ads. Credit repair can be both risky and expensive. Plus, these services can’t really do anything that you couldn’t do yourself – and when you do it, it’s free.
You can read the complete Bankrate.com article by clicking here.