Quick to Sign Up, Slow to Pay Down
When a person finds out their credit rating is much lower than expected, it is usually owing to avoidable blunders. Having too many credit cards is a common problem. Credit cards can help you build or rebuild your credit rating, but they are double-edged swords that can cut it down as well. The more credit cards you have, the greater the chances are for mismanagement.
Missing payment deadlines is another damaging mistake people make. It may only take one or two late payments to move a loan from a green rating to a red. So if you have late payments on all of your credit accounts, you may find yourself in the “high-risk” section despite diligently paying the loans down (although not on time). It sounds picky, but banks can afford to be uptight because they have a huge pool of people seeking loans. It is your responsibility to keep your credit rating in shape.
The Credit Report
The first step toward improving your credit rating is to find out what it is. You can get your credit rating the same way lenders and landlords do – from the credit bureau. It depends on the bureau, but you can usually view it online or have it mailed. One credit report a year from each agency is due to you by law. It will come in the mail and, though it won’t show your score, it will show everything else. Be warned, these credit bureaus may sell your address to credit card companies unless you explicitly opt out, so read the conditions of use carefully.
After you have the report, you can check if it is accurate and identify the accounts that are dragging your rating down. After that, it is just a matter of getting rid of troublesome accounts, canceling unnecessary cards, consolidating debts, and paying down your overall debt on time. Using automatic payments and tightening up your budget to get your debt under control will keep your credit rating from getting worse and, over time, will improve it. You could also improve your credit rating by changing your other data – earning more and purchasing more financial assets – but that won’t help you if you don’t get a handle on your debt habits first.