5 Steps Toward Building a Better Credit Score

The need for a good credit score is an increasingly important fact of life. Not only do credit scores influence your ability to get a loan, but they are also now often used to determine whether you will be hired for a job or allowed to rent an apartment.

Being in serious debt can wreak havoc on your credit score. Although filing for bankruptcy is a good long-term solution, it too can cause a credit score to drop in the short term.

There’s no magic trick to raising your credit score. It takes hard work and a lot of responsibility. If you’re looking to improve your credit score, here are the five steps you should take:

Pay on time: The worst thing you can do to your credit is miss payments. Making late or partial payments takes a close second. If you want to improve your credit score, you need to pay all your bills on time every month.

Pay down your balances: While making the minimum payments every month may keep you out of trouble, it won’t have a substantial impact on your credit score. Instead, you need to chip into the principal, especially on your credit cards. Make a budget, and allot as much as you can to paying down debt.

Use your credit: It feels unfair, but it’s true – the only way to improve your credit is to keep using it. But, this doesn’t mean that you should run up a balance. Instead, make a couple small, but necessary, charges – like groceries or gas – and pay them off in full every month.

Check your report: Most credit reports have some kind of mistake noted on them. Sometimes, those mistakes could cause you to receive a lower score than you deserve.

Get help: Don’t be afraid to ask for help if you need it. Sometimes, a Chapter 13 or Chapter 7 bankruptcy is the best solution to overwhelming debt problems. In other cases, a financial counselor or community organization might be able to help you make a plan to make a budget and take control of your finances.

Taking these steps can help you get your credit score back to where you want it to be.

Source: New Jersey Newsroom, “How to Improve Your Credit Score in 5 Steps,” Paul Sisolak, March 23, 2012.

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