Community Outreach Coordinator
Cambridge Credit Counseling Corp.
It’s important to realize that if your credit score is poor, it won’t necessarily remain that way forever. Your current score is simply a snapshot of your credit profile at any given point in time. As long as they are accurate, negative credit notations that appear on your reports will only remain for seven years, and then they must be removed. Bankruptcy notations are treated differently. They stay on your report for ten years. In the meantime, it’s your responsibility to make sure that every new addition to your report shows evidence of better payment patterns.
Credit reports and scores are very time-sensitive items. Your score from three months ago is probably not the same score a lender would get from the credit reporting agencies today. If you do have negative notations on your report, even before the seven years have passed, if you’ve re-dedicated yourself to meeting your obligations on time, your credit score should begin to reflect these efforts. If you can be patient and make the necessary adjustments, it is possible to improve your overall credit profile and your credit score. The bottom line is, it’s up to you to improve your credit performance from this day forward.
Perform a Credit Check-up
To begin the process of improving your credit profile, order a copy of each of your credit reports from TransUnion, Experian, and Equifax, the country’s three major credit-reporting agencies. Many businesses and lenders report information to only one or two of the agencies, but rarely to all three. This causes the information in your reports to vary greatly. Reviewing each of your reports will provide you with a clearer picture of your overall credit profile.
During your check-up, be on the lookout for errors contained within your credit reports. It has been estimated that more than 40% of the reports on file contain mistakes. Do you have negative entries on your report that are incorrect, invalid or that have been in some way misrepresented? You should also look closely for unauthorized inquiries, incorrect mailing addresses and Social Security numbers, as these may indicate that you have been a victim of identity theft.
If you do find errors within your report or discover that you’re a victim of identity theft, there are steps you can take to correct the items in question. As stipulated in the Fair Credit Reporting Act (FCRA), both the credit reporting bureau and the information provider (the person, creditor or organization that provided information about you to the credit-reporting agency) are responsible for correcting inaccurate or incomplete information in your report. They won’t make these fixes on their own, however; it is up to you to notify them of any mistake.
Managing Credit Responsibly
The following are some additional strategies you may make use of when attempting to improve your credit profile.
Keep the balances as low as possible on your credit card accounts. High outstanding debt can have a negative effect on your score.
Pay off debt rather than move it around. The best way to improve your score in this area is by paying down your revolving credit accounts. In fact, owing the same amount but having fewer open accounts may actually result in a lower score.
Don’t close unused or old credit cards as a short-term strategy to raise your score. Shutting down credit accounts lowers the total amount of credit available to you, and it also gives additional weight to any balances you do have when it comes to calculating your credit score. Closing your oldest accounts can actually shorten the length of your reported credit history and make you seem less creditworthy.
Don’t open a number of new credit cards that you don’t need. This approach could backfire and actually lower your score.
Don’t open a series of new accounts in a short period of time. If you have only been managing credit for a little while, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a negative effect on your score, especially if you don’t have a lot of other credit information.
Re-establish your credit history if you have had problems in the past. Opening new accounts responsibly and paying them off on time will help raise your score in the long term.
Add positive information whenever possible to show stability in your credit profile. If you have extremely poor credit or have even filed for bankruptcy, don't let your credit status go dormant. The faster you begin to re-establish positive credit, the faster you'll improve your credit profile. One way to achieve this is to get a secured credit card.
It’s okay to have credit cards, but you must manage them responsibly! In general, having credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards, for example, tends to be a higher risk than someone who has managed credit cards responsibly.
Improving you credit profile takes time. Unfortunately, negative items tend to affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score. The best course of action is to adopt healthy credit habits and maintain them.