How to Improve from a Bad Credit Situation?

By now, we should all know how important it is to have a good credit score. These days you cannot qualify for a mortgage or an auto loan if your credit score is poor and you have a very hard time qualifying for a credit card worth having without a good score. A 20-30 point increase in your credit score, from 690 to 720, for example, can be the difference in paying 5.75% to 5.25% on your home mortgage. This equates to tens of thousands of dollars over a 15 or 30 year mortgage. Similar examples can be used when it comes down to qualifying for a credit card. Would you rather has an esteemed card with a low APR and great support, or a card with a 20% APR and dozens of different fees? Plain and simple, it is extremely important to have a good credit score in this economic climate especially; here is a quick guide on how to improve from a bad credit situation.

1. Know your credit score! This seems fundamental, but you cannot improve your credit situation without knowing what exact situation you are in. You can access your credit score online at websites such as, but to do this you have to join a program that costs 20 dollars a month! They sneak this in the fine print and catch many off guard when they check their credit card statement. To check your credit report online for free, with no strings attached visit!

2. Once you know your credit score and you have a decent idea as to where you stand, you need to take action! The easiest way to improve your credit score is to pay off all outstanding debts. If you have a credit card with a balance on it, pay it off as soon as you possibly can. At the very least your balance on your card should be 30% of your maximum credit limit or less. If the limit on your card is 2,000 dollars, you should never have monthly balances of more than 600 dollars. Going over your credit card limits is credit score suicide!

3. Be sure all the information on your credit score is completely accurate. Over decades and decades it is easy for people to make mistakes or overlook things. Maybe your phone company says you still have a 50 dollar unpaid balance or the doctor’s office did not receive one of your checks two years ago. Little things like this here and there add up big time on your credit report. If you see errors on your report it is important to get them fixed, “pronto”. Also, if you see a few charges that you can pay off with ease, do so as soon as you can and watch your score rise and rise.

4. Build credit! Steps 1-3 are very important, but in the end one of the most important aspects to your credit score is how long of a credit history you have. You can have a great reputation for paying off your debts ahead of time, but if you have only been doing so for a couple of years your score will be lower than someone who has had a great credit history for decades and decades. Make everyday purchases with a credit card instead of a debit card or cash, but be sure to pay off your balance as soon as you can each month so you do not end up paying interest on your purchases. The longer you build up your credit and make wise decisions financially the better your credit score will be.

Five years ago your credit score mattered, but you could still “get by” with a poor score because gaining access to credit was so easy. The banking crisis in 2008 and the “great recession” that followed it changed everything. It is important now more than ever to have a good credit history and to stay on top of everything financially.