There are many reasons for a poor credit rating, including bankruptcy, late payments, poor ratios, and excessive credit inquiries. It is possible to improve a credit rating, despite these factors. Consumers typically work to improve credit ratings in order to get better interest rates, lower payments, or to get approval for a car or home loan.
Improve Your Credit After Filing For Bankruptcy
A bankruptcy is a common reason for a poor credit score. While it is impossible to reverse a bankruptcy, which will remain on a credit report for up to 10 years, the damage can be lessened by careful credit management. It is possible to mitigate the damage caused by the bankruptcy by ensuring that all credit after the bankruptcy is used responsibly. Retaining a store credit card during the bankruptcy will also help to build new credit after the bankruptcy, and show continuity. In addition, applying for low-limit, high security credit cards after the bankruptcy is complete will assist in the process of showing a new, and clean, credit history. Showing responsibility by making all payments on time, and in full, will also help to improve a credit rating after a bankruptcy.
Make Timely Payments to Improve Your Credit Rating
In order to improve a credit rating, it is imperative that all payments to all revolving debt are made on time. Late payments, particularly payments made more than 30 days late, will lower a credit score swiftly, and will remain on a credit report for years.
Paying Down Your Debt
A credit score is based, in part, on the amount of available credit compared to the credit limits. A consumer who has used 99% of their available credit will have a lower credit score than a consumer who has only used 50% of their available credit. For this reason, it is possible to improve a credit rating by paying down some credit cards. The lower the balance on a credit card is in relation to the credit limit, the better it will look on a credit report.
Avoid Excessive Credit Inquiries
Excessive credit inquiries can have a negative effect on a credit rating. For this reason, applying for too many types of credit at the same time should be avoided. Each time an individual applies for credit, the credit issuer will pull a copy of their credit report to determine their creditworthiness. When this happens many times in a short period of time, it drops the individual’s credit score, due to the fact that it appears that the consumer is desperate for credit. In order to improve a credit rating, it is important to spread out inquiries over time.
You Can Improve Your Credit Rating
While there are many factors that combine to determine an individual’s credit rating, it is possible to improve credit ratings with a few simple actions. Maintaining stable credit accounts, making payments responsibly, paying down debt when possible, and avoiding excessive credit inquiries are all actions that consumers can take that all help to improve a credit rating.