By Ken Brossman, District Manager – La Crosse, Marine Credit Union
A low credit score can be difficult to rebuild, but your ability to adjust your habits can definitely help. It may take some discipline, but the outcomes for you and/or your family will be worth it! Follow these tips to get the ball rolling:
- Always pay your debts on time. Each time you make a payment on time, it is helping to bring your credit score back up. It may not seem like a big deal, but you are proving to the credit bureau and your bank that you can be responsible with your money, pay on time and break the bad habit of late payments.
- Limit your credit card and other revolving debt. Credit cards are considered revolving debt or reusable credit because the balance increases as you spend and decreases as you pay it off. And remember as your balance increases, your available credit decreases. This is an easy way to build credit and can be useful when used with discipline.
- Keep your revolving debt ratios low. According to the Credit Card Forum, “on revolving credit accounts (i.e. credit cards) the average debt to credit ratio is seven percent.” Not using all of the credit that is available to you demonstrates responsible use of the account. The lower you can keep this ratio, the better credit score you will maintain.
- Pay off your collections and judgments. Work with your bank or creditor to come up with a solution to your debts that have gone bad. Paying these off can do wonders for your credit score.
- Monitor your credit report and make sure it’s accurate. As your credit score increases, you should be able to get a lower interest rate on your loans or debt. Often times collections or judgments that have been paid off are still reporting open. But remember, every time a bank, employer or retail store performs a hard inquiry on your credit report, it decreases your credit score. You have a right to a free copy of your credit bureau report annually. Take advantage of this to watch for errors.
- Maintain long relationships with your creditors. Responsible use of your available credit over an extended period of time will really help you improve your score. Closing existing accounts and opening new ones can actually have an adverse effect on your score.