Improve your credit rating yourself – tips on how to do this

A credit score is a rating system that creditors use to help determine whether to give you credit and how much to charge you for it. If you’ve ever applied for a credit card, loan, or insurance, there’s a file on you known as your credit report that will contain your quality score.

It is important to check your credit report from time to time for accuracy. This file contains information about you and your credit experiences, account payment history, the number and type of accounts you have, overdue payments, collections, outstanding debts, bankruptcies and the age of your accounts, collected from your credit application and your credit report. Using a statistical formula, creditors compare this information with the performance of consumers with similar profiles.

A credit scoring system awards points for each factor. A total number of points, known as a credit score, helps predict how creditworthy you are, that is, how likely you are to pay back a loan and make payments on time. In general, consumers with good credit risk have higher credit scores. The quality of your credit can affect your ability to get credit, insurance, and employment. Having good credit makes it easier to get loans at lower interest rates. Lower interest rates usually mean lower monthly payments, which saves you money.

Do you have bad or poor credit?

Do you want to improve your credit and credit rating? Then you are on the right track and there are proven steps you can take yourself to realize this.

Now for the bad news. Only time and effort, along with a personalized debt repayment plan, will improve your credit report and rating.

The good news is that you can do all the things you need to do to improve your credit yourself, at little or no cost.

Step 1. Develop a personal budget.

Take control of your financial situation by realistically estimating how much money you are bringing in each month and how much money you are spending. List your income from all sources. Then list your “fixed” expenses, which are the same every month, such as mortgage payments or rent, car payments, and insurance premiums. Then list the expenses that may change or vary from month to month, such as food, entertainment, recreation, and clothing. Writing down all of your expenses, even those that seem insignificant, is a helpful way to get to grips with and track your spending patterns, identify necessary expenses, and prioritize your expenses. The main goal is to ensure that you can get by with basic needs such as housing, food, health care, insurance and education.

Step 2. Balance your checkbook.

Yes, it seems like common sense to do this, but you’d be surprised how many people either don’t know how to do it, or just hate balancing their checkbook. If there’s anything on your bank statement that’s confusing or you just can’t get it quite right, go to your bank representative for help. Either way, it’s absolutely crucial to keep your checkbook under control or it will continue to control you.

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Step 3. Make a plan to save money and pay off your debts.

You might say… hey, I can’t pay all my bills right now, how am I going to save money? That’s why it’s so important to get your personal budget under control. Reducing your monthly expenses for items that are not absolutely necessary is necessary to get your budget under control. It sounds simplistic, but your goal is to bring in more money each month than the amount of money you spend each month. Until you find a way to live up to this fundamental truth, you will not be able to pay off your debts and become more creditworthy in the eyes of lenders.

Not sure how to accurately collect and itemize all your monthly expenses and compare them to your monthly income? You can find many helpful resources available online, at your local library, or at bookstores that cover money management, personal finance, and budgeting techniques.

Step 4. Pay your bills on time.

Obviously, but it is necessary to show lenders that you are improving and able to pay on time each month. If you’re struggling to make ends meet, contact your creditors right away. Tell them why it’s hard for you and try to work out a custom payment plan that lowers your payments to a more affordable level. Don’t wait for your accounts to be handed over to a collection agency. At that point, your creditors have given up on you.

These are some of the painful but necessary steps you need to take to improve your credit and rating in the eyes of current and future lenders. So embrace these steps and make it work for your personal financial needs.