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The road to a better credit rating

November 1, 20226 minute read

The road to a better credit rating

The road to a better credit rating

A good credit rating makes life easier sometimes. It can make financial decisions less stressful than they would be with not-so-great credit, and it could mean access to more advantageous mortgages and loans, lower interest rates, lower premiums and, potentially, lower down payments.

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

There is, but it won’t happen overnight despite what some credit-repair companies claim. It takes patience and planning to make the biggest improvements. Still, 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 lend you money. Even if all you can afford is the minimum monthly payment, that still counts in your favor. If you need to, put due date reminders on your calendar or set up automatic payments with your financial institution.

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Pay down existing debt.

If 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.

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Keep credit card balances as low as possible.

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Keep credit card balances as low as possible.

Staying below half your credit limit is recommended but staying below 30% 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.

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.

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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 Annual Credit 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 and talking to your financial institution as well. Many have programs and resources available to help.

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.

Better credit is just ahead.

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The WSECU Create Visa card. It’s made to  serve you — and your credit — well down the road.

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