Your credit report shows how well you managed your financial responsibilities during a certain time period. Negative information drops off over time, but the positive information remains. To establish a positive credit history and help improve credit scores:
- Consistently use your complete name. Providing complete, accurate and consistent identification on your credit applications helps set up your credit history correctly from the beginning. It also minimizes the chance that your credit file will be incomplete or mixed with another consumer's file.
- Pay your bills on time. Most lenders look at the most recent information on a report. So if you've paid your accounts on time for the last two to three years, the lender may weigh that more heavily than a series of late payments from five years ago.
- Set up a budget, and live within it. In the age of self-help and empowerment, managing your finances should top your list.
- Review your credit report 60 to 90 days before making a major purchase.
What You Could Do If You Fall Behind on Your Payments
- Contact your lenders. Many will work with you to set up a different payment schedule or interest rate. Ignoring the situation will only add to your problems. It never hurts to ask.
- If you have an overdue bill or an unpaid debt, pay it off. You may find it easier to pay one affordable consolidated loan rather than several accounts.
- Stop using credit until your finances are under control.
- Look to professionals if you need credit help or if you don't have time to develop your own plan. Quality non-profit credit counseling organizations help consumers understand credit reports, contact creditors, manage debt and set up budgets. You also might find consumer credit help at your local community college or community center.
Become an Educated Consumer
Going to a credit repair clinic will not help improve credit scores. There is nothing any credit repair clinic can legally do for you — including removing inaccurate credit information — that you can't do for yourself for free, and their fees can be substantial, ranging from hundreds to thousands of dollars.
The Credit Repair Organizations Act is a federal law that prohibits credit repair clinics from taking a consumer's money until they have fully completed the services they promised. It also requires such firms to provide consumers with a written contract stating all the services to be provided and the terms and conditions of payment. Consumers have three days to withdraw from the contract.