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The Road to a Better Credit Rating

March 29, 20216 minute read

A bad credit rating can not only make your life more difficult, it can also be a source of stress that weighs on every financial decision you make. And it can cost you. A low credit score means less access to the most advantageous mortgages and loans, higher interest rates, higher premiums, and higher down payments.

That’s why it’s crucial that you keep your credit history as pristine as possible. But what if your credit has already been damaged and you’re ready to start down the road to repair? Is there some way to fix or improve your credit rating?

There is, but — despite what some credit-repair companies might claim — it won’t happen overnight. Along with patience and planning, there are immediate actions you can take to get the process started:

Establish a good payment history.

This may be the most obvious piece of advice, but it’s also the most important in terms of its influence on your credit score. Simply put, make a point of paying your credit card and loan payments on time. A single missed payment of more than 30 days can knock your score down significantly.

Prospective lenders want to see that you’re responsible and consistent before they loan you money, so even if all you can afford is the minimum monthly payment, that still counts. If you need to, put due date reminders on your calendar or set up automatic payments with your financial institution.

Pay down existing debt.

Assuming you can afford more than minimum payments, make it a priority to reduce or eliminate any large outstanding balances. The less overall debt you carry, the less of a risk you’ll appear to creditors. Moving balances to a single card with a 0% APR balance transfer offer can allow you to consolidate debts and temporarily avoid interest. Just don’t get stuck paying significantly more interest when the promotional period ends. And put your original card (or cards) in a drawer!

Don’t apply for new credit unless absolutely necessary.

The more credit applications you submit or accounts you open — especially in a short period of time — the riskier you’ll seem. So, yes, apply for a balance-transfer card if you really need it, but don’t get carried away.

Keep credit card balances as low as possible.

Below half your credit limit is recommended, but 30% or less is preferred since it shows less dependence on borrowed funds. If you make monthly payments a day or two before your statement closing date, the reported balance will be that much smaller. Over the long term, this will add points your credit score.

The longer your credit history, the better.

That means avoid canceling older, rarely used credit cards that extend your overall history. To make sure issuers don’t close an inactive account, set up a small recurring payment that you can easily pay off every month, such as a utility bill or streaming subscription.

Regularly check your credit reports.

This may be the quickest fix of all, since a reporting error, identity theft or fraud could impact your score significantly, and having it corrected will almost immediately raise your score to where it belongs. Go to to receive one or all of the three free reports you’re entitled to each year.

Sometimes outside help is necessary. If you need professional help or advice, consider reaching out to the National Foundation for Credit Counseling. Consider talking to your financial institution as well. Many have programs and resources available to help. There are other organizations you can turn to, but do your homework first. Not all are legitimate, and some can do more harm than good.

Smart financial habits are the best route to an improved credit rating. As long as you’re patient, consistent and stick to a plan, you can ultimately bring your credit score up to a healthier number.


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