When your credit is anything less than good, it can start to negatively impact different areas of your life and limit your lifestyle dramatically. But, you can take steps to improve your credit score.

Your credit score is a three-digit number that defines your individual credit worthiness. When you apply for a loan, credit card, apartment, or a job, it’s an unbiased look at your credit history. It shows your ability to manage money and the responsibility that comes along with it. How much risk can a lender expect to assume when they extend credit to you? How likely are you to repay your debt on time? It tells the whole story without sugarcoating any of the details. If it’s not where it should be, you can improve your credit score.

What’s a Good Score?

Credit scores range anywhere from 300-850. Lenders have guidelines, but each has its own definitions as to what exactly is good vs. bad credit. Generally speaking, excellent credit is any score greater than 750. Good credit ranges from 700 to 749 and fair credit falls between 650 and 699. Poor credit is a score between 600 and 649 and anything less than 600 is considered bad credit. When your credit is anything less than good, it can start to negatively impact different areas of your life and limit your lifestyle dramatically.

How can I improve my credit score?

Improving your credit score is not a quick or easy process. It takes time and discipline, but it’s well worth the benefits it brings. You can expect higher lender confidence, more approved loan applications, lower interest rates, and better financial offers from credit card companies.

Smiling man calling on phone and looking at tablet computer.Here are some steps that can help you move your credit score in the right direction:

  1. Request free copies of your credit reports from the three major credit bureaus. Visit the federally authorized site, annualcreditreport.com, to request free copies of your credit reports. Review them carefully and dispute any mistakes that you find.
  2. Avoid any new credit card purchases. This may be difficult, but each purchase raises your credit utilization – the ratio of your outstanding balance to the credit card’s limit. Try using cash for as many necessary purchases as possible.
  3. Clear up past due balances. Did you know that your payment history makes up more than a third of your credit score? It’s critical to get your past due balances up to date, especially before they’re sent to a collection agency.
  4. Don’t open any new credit accounts. Each time you apply for a new credit card, loan, or other line of credit, the lender checks your credit history. Those inquiries hurt your score, so refrain from applying for any other types of credit while you’re in repair mode.
  5. Pay down debt. Find ways to send extra dollars to your highest interest credit card balances. Be creative. Is it possible to find a part time job? Do you have a talent for making something you could sell? Try cleaning out a closet and selling some items on an online garage sale site. Or, put an ad in your neighborhood newsletter offering handyman help on weekends.
  6. Make payments on time. Early or on-time payments are your only choice. Late payments are never an option when you are trying to repair your credit. Avoid them at all costs.
  7. Leave accounts open. Once you’ve paid down your balance, don’t close those zero balance accounts. Your credit utilization rate will be substantially lower if your overall combined borrowing power is higher. Lenders generally like to see a credit utilization percentage below 30%.
  8. Call your lender. If you’re having difficulty, contact your lender or credit card company before they contact you. It sends a positive message, letting them know you want to work through the issue and get back on track. Also, some lenders may be able to offer a temporary hardship program that may be of benefit to you.

Young man texting on the tablet.Bad credit can be incredibly stressful and costly at the same time. Be sure to track your progress and continue to request your free credit reports annually.

You can even stagger them throughout the year so you can review them on a more regular basis. Improvement will take time, but stick to the basics and that three-digit number will continue to climb!