1.Make a budget and stick to it.
Creating a budget, either written or online, will help you get rid of your debt, improve your credit, and stay out of debt.
While the credit bureaus won’t see your budget, it will see the good results of your sticking to it.
2.Get out of debt.
Getting rid of as much of your debt as you can is the first and most important step in improving your credit.
Make a list of all debts and prioritize which ones to pay off first.
Try the avalanche technique.
To pay your debts off as quickly as possible, start by paying off the debt with the highest interest rate first.
Continue to pay off your debts, working your way down from the highest interest rates to the lowest.
You can also try the snowball technique.With this method, you pay off your smallest debt first and work your way up.
This is not always the most efficient way to pay off your debts in terms of saving money, but the sense of accomplishment that comes with successfully paying off a debt, even a small one, can help motivate you to keep at it.
To remove the temptation, “retire” of some of your credit cards as you pay them off.Too much credit can be a bad thing.
Closing credit accounts can have a negative effect on your credit score; a better solution is to pay off excess cards and stop using them without closing the account.
Cut up the card so you won’t be tempted to use it.
3.Apply for a secured credit card.
If you are having trouble getting credit due to a poor credit score, or you are a first timer, apply for a secured credit card from your bank.
This type of card uses money in your savings account as security.
This is an easy way to establish a great credit history.)
4.Refinance loans as appropriate.
Note that “paying off” loans increases your score.
Oddly enough, occasionally refinancing your mortgage and trading in cars with loans on them “pays off” loans, too.
If you do refinance, do it for no points and a lower rate.
5.Contact the lender if you cannot make payments on time.
If you experience a job loss or other misfortune, contact your lenders right away.The worst thing you can do is ignore them.
Explain your financial situation and agree on a new payment schedule that you can manage.
Get the agreement in writing and ask them to include a note that your payments will not be reported as late.
6.Build up different types of credit.
A “healthy mix” of different types of credit builds up your score better than simply one type.
For example, you might have a car loan, mortgage or line of credit and a credit card.
Let’s say two people have $10,000 total in total credit each, and both are making timely payments.
One has only one credit card.
The other has a credit card, a car payment and a bank line of credit (overdraft protection).
The second person’s score will often be much better than the first one’s.
7.Meet with a credit counseling agency.
If you need any kind of advice to help get out of debt and improve your credit history, find a find a low or zero cost agency to help you.
There might be free services available from your employer, military base, credit union, housing authority, or a local branch of the U.S. Cooperative Extension.
Beware of for-profit companies that charge you a fee and promise to have all or most of your debts forgiven.
Even if they pull it off, your credit score will plummet