With the economy in the state it’s in today, your credit score is even more important than it was 5 years ago. Credit lenders will be looking even closer for any reason to deny you credit, so proper care and maintenance of your report is vital.

Gather Your Documents

The first step you have to take is to get a copy of your credit report. You can't successfully manage your credit without this information. Wouldn't it be nice to have it in one place, readily available? Instead it's spread out over three companies: Experian, TransUnion and Equifax, and of course they don't all have the same information. Some lenders report your information to all three, some only to one or two. So to get a complete picture, you need to collect reports from all three agencies. While they all offer to sell you your report anytime, you are entitled to a free copy once a year through the AnnualCreditReport.com website. NOTE: any other site offering your free report is more than likely a scam trying to get your personal information. Make sure you are using the right site. If you're not sure, you can also find the link at the FTC.gov website. 

A large part of your credit score is determined based on the average age of your credit history, by determining how long each account has been open. A mistake that people make is to consolidate debt in one account then close those empty accounts. Or they open a new account with a low interest rate and transfer their balances.

The problem here is two-fold. First, by closing the old accounts you are decreasing the average time your accounts have been open and that hurts your credit. The second is your debt-to-credit ratio. By consolidating your debt to one card and closing the others, you’re debt-to-credit ratio is going through the roof. Even if you consolidate to make one payment, leave those others open, it will increase your score.

Don't Fall For The “We Can Fix Your Credit Now” Scams.

There are hundreds of places out there that will tell you they can fix your credit report for you. Often claiming to be “the secret the credit companies don’t want you to know”, they are typically full of it. More importantly they are going to do the same things you can do for free.

First they’re going to get a copy of your credit report. Then they’re going to dispute every negative item on it. Then they’re going to collect their fee from you. So beat them to it. You are entitled, in the U.S, to a free copy of your credit report every year no matter what. You are also entitled to a copy of it if you are denied credit; your denial letter is required by law to have the company that issued the report that led to you being denied credit. You can contact them within 30 days, and they will send you a copy of your report.  Lastly, the state where you live may require that your credit report be made available to you if you have negative items that have been reported on it. In those states, for instance Colorado, the credit companies are required to let you know of this right and give you a chance to take advantage of it.

Next, look at every item listed as “Potentially Negative”. Look closely at every item. Is there anything that looks out of place, anything that you can’t verify? Dispute it. In fact, dispute every negative item, even if you know it’s valid. If the company fails to respond in time, the credit company has to drop it from the report. 

Do not apply for any loans unless you are absolutely certain you can be approved, because every rejected loan application has a negative impact on your score. Instead of going for the less-likely loan, settle for one that may have a higher rate but you’re more likely to be approved for. Think of it as investing in better interest rates that come with your higher credit score in the future.

Variety Is The Spice of Credit

Revolving credit card accounts are the ones most frequently defaulted on. They the largest risk for a bank, because there’s no collateral on the money they are loaning you. So borrowers who have a lot of revolving credit accounts compared to other accounts are considered a greater risk and that drops their score. So try to have a few different types of credit accounts, a mortgage, student loans, credit cards and car loans. And make sure they all stay up to date. It shows lenders you are able to manage a variety of loan types. 

Any past-due or uncollected payments on an account negatively impact your credit score. So make sure you keep up on your payments. Are you disputing a charge? You are not required to pay an amount while it’s in dispute, and the credit company can’t report disputed amounts on your credit report. Just make sure that as soon as the question is resolved, you take care of any payment you have to make, as soon as you promise to.

What if it goes to collections? Ideally, you’ve taken care to pay everything on time, but things happen sometimes and things slip through the cracks. The most important thing is to talk to the collector: DON’T PUT IT OFF and DON’T TRY TO AVOID THEM. They are required to follow certain rules in collecting debts, but if you will find that the more honest and forthcoming you are, the easier they are to work with. They are often willing to settle debts for less than what the original bill was. But you have to be willing to work with them, so work WITH them.

Request a Credit Limit Increase

One phone conversation with your credit card company, sometimes even a 5 minute trip to their website, can get your limit reviewed. This leads to an increase in your available credit which lowers your debt ratio and improves your credit score. The goal is to have as much available credit and use as little of it as possible.

Every time you apply for a loan or credit card, the potential lender requests your credit report. This always has a negative impact on your credit score, and they stay on your report for one year. One trick you can use is to make all loan requests within a two-week time period. It typically takes that long for the credit report to show the requests and the credit companies will only see one request.

Mortgage planning: if you’re planning to apply for a mortgage, don’t apply for anything else in the prior year. This will prevent the negative impact of credit reviews. Also, be aware that when shopping for your mortgages, if you apply for more than one mortgage in a 30 day period, you run afoul of this. So if at all possible try and pick one mortgage company, rather than apply at several.

Don’t Be Tempted By Introductory Rates

Lenders like to reward consumer loyalty so keeping your credit open with one company can pay dividends like lower rates and higher limits. And switching credit cards often can really hurt your credit score. Every time you see a great interest rate and bonuses for switching to another company, think about the impact on your credit report first. Will switching improve you credit? What impact will it have on your financial situation overall?

Talk To Your Lenders

I don’t know if I’ve emphasized this enough. Talk to your lenders and creditors. If you keep the lines of communication open you can get some great benefits just by talking to them. Are you a loyal customer with a great history, but you were late on a payment last year and it got reported? Call and ask if they would erase it from their records. Many companies are willing to help you out if you ask. 

Hopefully, this can help you keep a shining credit report shining, or help improve one that may be weak. And these are just a few of the things you can do, there are probably many more that haven't made it to the list. Managing your finances should be as important as running any other area of your life. Don't neglect it or you may find yourself in trouble when you really need it. 

Are there any tips you'd care to share? Any successful strategies that you or someone you know has used to help improve your score? I'd love  to hear your stories and ideas.