The first step towards improving poor credit, or a low credit score, is to determine the reason why you have poor credit in the first place. The most obvious and typical reason for poor credit is that you haven’t been able to keep up with bills. If that’s the case:
- Find ways to cut your expenses; even if it’s just temporary.
- Get a second job to increase your income.
- Restructure your mortgage (and other loans) to lower your payments.
- Change your spending habits if necessary. If you have credit cards, stop using them until you have things under control.
- Contact your credit card and loan issuers. Let them know you need some relief and ask them to set up a different repayment schedule that is within your means.
Still, there are other factors that could also hurt your credit score. Each credit reporting agency uses a unique formula to determine a credit score. Generally, though, they all consider the following:
- Your payment history.
- The amounts and types of debt you have.
- How long your existing loans and credit cards have been open.
- Your most recent efforts to establish new and/or additional credit.
- The various categories of credit you already have.
Start by learning more about how credit scores are determined at the FICO score online education center and then reviewing your own credit reports. You are entitled to a free copy of your credit report every twelve months. These can be obtained directly from annualcreditreport.com. Alternatively, you can contact each of the three major credit reporting agencies (Equifax, Experian, and Transunion) directly.