Here are five tips to help your credit score recover:
1. Don’t Let Mistakes Haunt You
The three major credit bureaus: Experian, Equifax and TransUnion, produce credit reports on consumers. These reports can contain errors, so it is important to make sure the information is accurate. Access your free credit report at annualcreditreport.com.
If you see an item that does not belong, dispute it with all three of the credit bureaus. You will likely see a boost when the item is removed.
2. Pay Bills on Time
If you have a history of making late payments, creditors see you as a bigger risk, and your credit report suffers. So, get organized and set up automatic payments and due date alerts with all your credit cards and loans.
3. Increase your Available Credit
We know that seems counter-intuitive but using less credit than what has been extended to you is a sign of restraint and that may boost your score. If your credit card balances every month are more than 30% of your total credit limit, your score may suffer, even if you are paying off your balances in full every month. So, keep an eye on those balances relative to the amount of credit extended. If you are consistently over that 30% mark, ask your credit card issuer for a credit limit increase. They may increase your limit to give you more wiggle room. Just resist the temptation to use that wiggle room to buy something you want.
You can get another little credit score boost if you target a 10% utilization rate. Americans with the best credit scores tend to have a utilization rate under 10%.
4. Leave Old Debt on your Report
You might be tempted to remove past paid off debt from your report. That can be a mistake. Good debt — debt that you’ve handled well and paid as agreed is actually good for your credit. The longer your history of good debt is, the better your score. So, don’t close old accounts where you’ve had a solid repayment record.
5. Stop Applying when Buying Stuff
That 10% discount for signing up for a store credit card may seem worth it in the moment, but if your credit score takes a hit for applying (whether you get approved or not) it may not be worth it.
Give yourself a little grace and time to recover from a less than attractive credit score. Know that your credit score suffers the most when a late payment first appears on your credit report, but the impact lessens over time and will disappear from your report after seven years.
