One Step at a Time: 5 Ways to Start Improving Your Credit Rating Right Now

Whether you’re looking to take a loan or just on a mission to boost your creditworthiness, improving your credit score is something that doesn’t happen overnight. It takes months if not years of effort.

The good news is that you can begin the process right away! The following are five proven steps you can take today to begin the journey of improving your credit rating;

  1. Start paying bills on time

The biggest factor that goes into determining a consumer’s credit score is how reliably you pay your bills. To this end, begin by paying your bills on time. This applies to pretty much everything that can go in your credit report including when you take a book from the library. That’s because even if the creditor (in this case the library) doesn’t call the bureau, they may call a collections agency to follow up on the unpaid bill. The moment this happens, the unpaid bill will appear in your credit report, further damaging your rating.

  1. Don’t do anything that indicates risk

Many consumers don’t know this, but you don’t actually have to take and default on a loan to damage your credit rating. Simply doing something that suggests present or future financial strain can alarm your card issuer, causing them to adjust your credit rating downward. Visiting a divorce attorney, for instance, may suggest a pending divorce while taking an advance may be a sign of current financial difficulty.

  1. Avoid opening new credit accounts

Opening a new credit account doesn’t always mean you’re trying to take more debt. And, even if you do, who knows? Maybe you’re in the position to repay the debts on time. Unfortunately, this isn’t how credit companies see it. To banks and financial institutions, opening a new account is a warning sign that the consumer is looking at taking new debt. This can have a negative impact on your credit rating.

  1. Set up automatic payments

We’ve already mentioned that you should start paying your bills on time. One way to achieve this target is to set up automatic payments. Most lenders provide bill payment deadline alerts, or they will if you ask for it. Use this as a tool to help you stay on top of your bills. Whether it’s an email or a text message alert, that beep could help you pay on time to avoid penalties as well as boost your credit ratings.

  1. Close your old accounts last

In a bid to rectify your credit record as you pursue a better rating, you may consider closing a few of your credit accounts. This is actually a good idea and experts such as CardGuru highly recommend it. Just remember to close the old, good accounts last. That’s because old accounts that were handled well are good for your credit score. That old debt that was repaid in full is good for your credit history and history makes up 35% of your credit rating.

There are certainly other ways to boost your credit rating. But these five should be a good place to start.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.