Advice for people with a low credit score - By: Jamie Simpson

To have strong overall financial health, all people need to have a good credit score. If you have a poor credit score you will have a difficult time obtaining a mortgage, auto loan, personal loan, or credit cards. If you have poor credit and are approved for a loan, you will almost always receive a higher interest rate than someone with good credit would receive. Luckily, if you have a poor credit rating, there are several things you can do to raise it.

The first step in raising your credit score is obtaining your credit report. A credit report is a consolidated report which includes information regarding all of your past and current financial payments. The report will contain information received from every creditor you've done business with over the past 7 years. Information in the report includes timeliness of payments, current account balances, overall available credit, and all accounts which have been sent to collections. One section within the credit report consolidates all negative information which will drive down your score. Obtaining your credit report is vital because it allows you to see what information is hurting your rating. Your report can be obtained once per year for free from any of the three credit bureaus.

After obtaining your report, the first thing you should do is clear up any incorrect negative information. This could include accounts that were opened fraudulently. To do this, you will need to contact the creditor listed on the report immediately. They will do some research, but should be able to remove incorrect information within 60 days.

To improve your credit score immediately, the best thing you could do would be to pay down your credit card balances. If your credit card utilization rate is above 50%, your score will be impacted severely. By paying down your credit cards so your utilization rate is below 20%, your score could improve dramatically almost instantly.

Going forward, the best way to improve your credit score over time is to make all of your debt payments on time. Timeliness of debt payments is the largest contributing factor towards your credit score, and after making all of your payments on-time for a year, your score should begin to improve considerably.

The third way to improve your credit score is to bring all of your delinquent accounts to current. If you have an open account which is past due, your credit could be severely impaired. By paying off the delinquent balance, your credit should improve immediately.

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