Improving Your Credit Record

Use the following tips to begin to improve your credit:

• Pay bills on time.  The most important rule for maintaining good credit is to pay your bills on time. You can begin to improve your credit history immediately by making at least the minimum payments on time. Within a few months it will be obvious that you are managing your credit responsibilities better and a new, stronger credit report will result.
  
• Use credit sparingly.  A general rule of thumb is to spend no more than a third of your income on debt, including mortgages, credit cards, and consumer loans. Try to use credit cards only for purchases that have long-term value, such as furniture, medical care, or emergency repairs. DON'T depend on credit cards for everyday frills like dining out or entertainment.
  
• Correct mistakes. Your credit is a reflection of the information in your credit report.  If the report contains negative information, it will negatively impact your credit regardless of whether or not the information is accurate.  Review your reports from all three credit bureaus for accuracy once a year, as well as several months before applying for a loan.
  
• Pay off old debts.  Make arrangements to pay off all existing debt.  Establish a written payment plan and when an account is paid off, be sure to get a letter from the creditor that updates your credit bureau record.
  
• Pay more than the minimum required.  When you pay only the minimum due each month, you end up paying a lot of money in interest charges.  For example, if you have a card with an 18.5 percent interest rate and you pay only the minimum balance due each month, it will take you more than 11 years to pay off a debt of $2,000. You will also pay interest charges of $1,934--almost doubling the cost of your purchase.
  
• Do not max out credit cards - use only 30 to 50 percent of available revolving credit.
  
• Work with a reputable nonprofit credit counseling organization.  Reputable nonprofit community-based credit counseling organizations can offer one-on-one assistance to help you improve your credit.  Don't confuse expensive credit-repair clinics with legitimate nonprofit credit counseling organizations.  Be sure to watch out for organizations that charge big upfront fees, make unrealistic promises, and lack accreditation credentials.  Contact ACCION to confirm that any fees that you are being charged are reasonable.

Before working with an organization, ask how the organization reports to credit bureaus, how often they pay your creditors, if you will need to change your payment dates to coincide with dates they pay their creditors, and how much time it will take to pay off your debt.

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