11 Simple Tips To Get Your Credit Back On Track
You know those moments that prompt us to take inventory of our lives? Birthdays and graduations certainly fall into that category, and purchasing a new home is no different.
There are a few things you need to get in order before you start looking for a home, and one of those is a good handle on your credit situation.
How does yours look right now?
If you know your credit history is less than stellar, here are 11 basic ways to improve your credit report before you begin your home search.
1. Get your credit report
The first thing you should do is investigate your credit history like a detective. Comb through your credit report with laser focus, and look at it as if you were considering yourself for a loan. Based on the history in your report, would you view your credit history as risky or safe?
There are a number of ways to get your credit report, and the three major national credit bureaus offer them for free.
2. Get familiar with your accounts
It’s natural for us to shy away from things that make us uncomfortable, and facing debt can be especially unpleasant. Since you can’t make any progress without a full view of your entire credit picture, it’s important to understand all of your financial accounts.
Create a new spreadsheet, list all your accounts in one column, and then add each account’s balance. Note the minimum payment for each, and indicate the due date. Now you have all your debts in one place, and you can see the big picture when it comes to your debt.
3. Make a plan
We live in a world full of technology designed to make our lives easier and more productive, and this same technology can help immensely when it comes to managing your debt.
Post each of your due dates on a calendar, and set reminders on your phone. Use online banking to send payments, and keep your end goal in mind.
Do you want to lower your monthly payments? How about pay off debt?
One tried and true way to attack your debt is to use the “snowball method”, which is a plan centered around paying off your smallest debts first, and then once that account is paid off, taking that payment and applying it to the next debt in line.
You can read more about the debt snowball method here.
4. Make payments on time
This is a big one, because late payments show up on your credit history, even if they’re only a few days late.
Set up automatic payments for your accounts to make sure you never let a due date slip by unnoticed.
5. Avoid new debts
If you want to dig yourself out of a hole, the last thing you should be doing is digging a bigger hole.
A credit line at the future store might be tempting, but that new dining room table can wait until you’re able to pay cash for it.
6. Build savings/emergency funds
While you paying off debt, experts say you should be putting away money into an emergency fund.
“It’s a lot easier to save $10,000 or $15,000 than to pay off however much debt you had because you’re not constantly being dinged with finance charges,” says a writer on DaveRamsey.com.
7. Pay off debt, instead of moving it around
Credit bureau Experian says your credit score is comprised of your payment history, so shifting balances from one account to another doesn’t necessarily show progress in paying down your debt.
8. Create payment reminders
A good rule of thumb is to be proactive with your payments, because collections and delinquencies go into your credit history.
9. Stay the course
Young couples often feel pressure to immediately create their parents’ lifestyle, even though they may not have the resources necessary to accomplish this.
That old car may not be as safe on the road as a brand new one. A nice new set of pots and pans can cook better meals than the old ones you got from the thrift shop.
Are you willing to sacrifice a few years of hand-me-downs while you get your credit history back on track? While you’re paying off debt, making your payments on time and seeking counsel from a mentor, you should be willing to sacrifice even those amazing deals you
10. Find a mentor
Do you know of someone in your circle of friends, family or acquaintances who could be considered money smart? If so, ask them if they could give you some guidance. Not only can they be an invaluable source of information and encouragement, they may also be a great accountability partner for you.
11. Dispute errors
Since you’re already monitoring your accounts, keeping track of your monthly budget and sifting through your credit report, finding a discrepancy won’t catch you by surprise.