8 Credit Tips When You’re Stuck With a Bad Score

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You know the feeling when you see the email alert for your most recent credit score. Dread, anxiety, and panic all flood your body. What if this new score is even worse than the last one? How can you break the cycle of bad credit and finally get on track?

Having a bad credit score can feel like wearing a scarlet letter. Even if no one you know is aware of your credit situation, it can feel like it follows you everywhere. The good news is there are things you can do right now to get on track and improve your score. Check out these eight tips and make progress on your credit score today.

1. Understand Why Your Score Stinks

You may have an idea of what numbers equate to a great score. Understanding these numbers is great, but do you know what data drives the score itself? Familiarize yourself with the factors that make up your credit score.

On-time payment history, credit utilization, credit history length, credit mix, and new credit are used to determine your score. Keep a watchful eye on all of these factors as you review your budget and expenses each month. Doing so will give you a good idea of what you need to work on.

2. Make Sure You Have a Complete Credit Lineup

Credit mix makes up 10% of your score. Revolving credit (like credit cards) and installment credit (like auto loans) are the two kinds you need. Each credit type shows potential lenders your payment and money management habits.

Installment loans can show solid or missed payment history. Credit cards can show how you treat a credit limit. Do you use all of your available credit or keep it conservative? If you have an incomplete mix of credit, consider a credit builder card to beef up your portfolio. These cards don’t require a credit check, so you won’t trigger a credit inquiry that could further ding your score.

3. Plan Out When You Apply for New Credit

Don’t hit submit on that credit application just yet. Hard inquiries that happen when you apply for new credit stick around on your credit report for two years. While they appear on your report for two years, they typically impact your score for one year.

If you’re in the market for new credit, consider your timing. Multiple applications for credit cards or personal loans during a short time could indicate risk for potential lenders. Research the right credit products for you before you apply. Planning will help you increase your odds of approval while decreasing the impact on your score.

4. Focus on Credit Utilization

That $6,000 limit on your credit card can almost feel like real money in your wallet, but be cautious. A credit limit is just that — a limit. The speedometer in your car acknowledges speeds up to 120 miles per hour, but safe speeds top out at 70. Treat your credit usage similarly to how you operate your car against its highest posted speeds. Stick to your limit.

Your credit utilization holds a whopping 30% weight when it comes to your score. Add this rule to your credit score arsenal — aim to use no more than 30% of your credit limit. Following the 30% rule can keep you in the reporting agencies’ good graces.

5. Eliminate the Risk of Late Payments

Forgetting to make a payment is a confidence-killer. One moment, you’re crushing it at work, having a lively debate with your friends about next weekend, and bam! Your latest email alert delivers the crushing news: You’re late on this month’s payment. Payment history makes up the biggest impact on your score — 35% to be exact — so don’t ignore it.

Save yourself the strife and set up automatic monthly payments on the essentials. Most credit cards have a low minimum payment that’s easy to anticipate. See whether your utility providers offer scheduled payments as well as budget-pay programs to help keep the payment flat. Often, budget-pay programs charge you the 12-month average of your bills. Set this up, and you’ll also eliminate ballooning bills.

6. Identify the Low-Hanging Fruit — and Pluck It

You may be feeling like there’s a mountain of work to do before your score budges. Your feelings are valid, and improvement won’t come without your consistent effort. The good news is, you can make quick progress.

Review the biggest offenders to your credit report and work on those first. If you’ve struggled with credit utilization, try to pay down your balance as much as you can. Ask your credit card company if there’s an option to increase your credit limit. If so, you’ll likely see your utilization drop. If you need a better credit mix, make sure you’ve got both revolving and installment credit covered.

7. Audit Your Credit Report

Your credit score is important, but it’s not the only thing you should focus on. Your score is tabulated based on what’s on your credit report, and it’s your responsibility to make sure it’s accurate. Request your free report and review your credit history, all the way back to your first credit request.

Review each lender, payment history, and detail to ensure it’s painting an accurate picture of your credit usage. If you spot any discrepancies, report them to both the credit bureau and the lender in question. Do your part to ensure the right financial information is on record.

8. Set Up Monitoring Alerts

Every other day, it seems like there’s a data breach at a large business, impacting millions of customers. Stay ahead of the game and set up credit monitoring alerts to help you keep tabs on your data. Alerts also monitor applications for new credit, so you can quickly address any illicit attempts against your improving credit.

Stay in control of who has your unique financial information and guard your access to credit. With monitoring in place, you’ll have peace of mind and can avoid dings to your credit caused by cyber-criminals. Just like you lock your car when you’re in the store, do your part to protect your credit.

Putting Your Plan in Action

Having a low credit score today doesn’t sentence you to a lifetime of bad credit. With a better understanding of how your score is calculated and your habits, you can earn a great score. Take these eight tips to heart, and you’ll be taking an enviable credit score all the way to the bank.