How to Increase Your Credit Score - Sliders vs Climbers

Do you have bad credit? Are you looking for ways to increase your credit score so you can qualify for better financing? This article gives you the guidance you need to accomplish this goal.

Millions of Americans have bad credit. It has been referred to as an “epidemic,” as if some kind of virus or bacteria is to blame. In truth, it’s not an epidemic. People do not randomly suffer from bad credit the way you would suffer the common cold. They bring it on themselves, usually through overspending and overreaching their financial limits.

I’ve been researching and writing about this subject for a long time, and I’ve realized that most people who need to increase their credit scores fall into one of two camps. Let’s call them “sliders” and “climbers.”

The sliders see their bad credit scores as something beyond their control. They refuse to accept responsibility for their own financial problems. They seek to blame other people and things. They will continue to slide along through life, with their bad credit scores in tow.

When they need some kind of financing, for a new car or a house, sliders will find a lot of closed doors. And when they do qualify for some kind of loan, they will pay incredibly high interest rates.

The climbers also have bad credit scores, but they do not blame anybody but themselves. They have made some financial mistakes in the past, but they know exactly what those mistakes are — and they have learned from them.

Climbers have accepted the reality of their credit problems, and they are working hard to increase their scores and get their finances back on track. They don’t need any hand-holding, but simply a little guidance.

If you are a slider, then this article is not for you. This article explains how to increase your credit score by (A) learning from your mistakes, (B) making sacrifices, and (C) exercising come financial discipline along the way. In other words, the steps I’m about to recommend are for the climbers in the bunch. By definition, a slider will not be able to accomplish these things. Instead, they will wait for the government to rescue them (”Where’s my government bailout?”).

Are you a climber? Are you willing to work hard to increase your credit score slowly but steadily over time? If so, then please continue reading!

Increase Your Score With These Steps

Your credit score comes from your previous financial activity. When you use credit cards and take out loans, it shows up in your credit reports. You have three of these reports, because there are three different companies who maintain them — TransUnion, Experian and Equifax. Why are there three companies? Because compiling and selling consumer data is big business, and there’s a lot of money to be made. But let’s stay on track here…

The data contained within your credit reports is used to produce a score. There are many different kinds of credit scores, but I won’t confuse you with all of that. For the purposes of this article, we are talking about the score that runs from 300 - 850, such as the FICO credit score. When this number is low, it’s a red flag to lenders. It shows that you have had trouble managing your finances in the past. This is the bad credit score situation I’m addressing in this article.

With that background information out of the way, let’s talk about some of the things you can do to increase your credit score over time.

• The first thing you need to realize is that your score is based on your own financial activity. Granted, there may be mistakes in your credit report that are dragging your score down (more to follow on that). But in general, you have nobody to blame for a bad credit situation but yourself.
• Surgeons say you must stop the bleeding before you can treat the patient. The same can be said for people trying to increase their credit scores. You must start by identifying the problem(s) that led to the situation in the first place. Have you missed a lot of bill payments in the past? Have you had any accounts sent to collection agencies? Have you been foreclosed on or filed for bankruptcy?
• Get copies of your credit reports from all three of the reporting agencies I mentioned earlier. You can get all three of them for free (once a year) by visiting AnnualCreditReport.com. Check them for mistakes. The main thing you’re looking out for are any credit accounts that are not yours, or accounts that you’ve closed (but are still shown as being active).
• If you find errors on your credit reports, you can dispute them through the company’s website that produced the report. The website should have a “disputes” page that is easily accessible from the home page — there’s actually a law that requires this.
• Your credit card balances also affect your score. This is referred to as the credit utilization ratio. If you are using a high percentage of your available limit (i.e., maxing out your cards), then your score will suffer as a result. So by paying down those balances, you can increase your score in a relatively short time.
• Your payment history accounts for a big chunk of your credit score. This refers to how diligent (or lax) you are when paying back your debts. If you fall behind on payments, and your creditors report the delinquency to the credit bureaus, your score will take a big hit. So pay your bills on time. Set up auto-pay whenever possible. Don’t set your bills aside for “later action” — this often results in missed payments.
• When you combine the two actions listed above (paying down credit card balances + paying bills on time), you can increase your credit score in the shortest amount of time possible.
• Lastly, I would urge you to be patient but persistent. It can take months to repair a bad score, but it can be done.
• Also keep in mind that most negative entries can stay on your credit report for seven years, and a bankruptcy can stay for up to ten years. So, during that time, you might be limited as to how much you can increase your score. But don’t let that stop you! You can make significant improvements, even while those negative items remain on your report.

So there you have it, your recipe for success. Sure it takes hard work. You’ll have to limit your spending and be more diligent in repaying your debts. But nobody said it would be easy. If you’re truly a climber, you’ll knuckle down and do whatever is necessary to increase your credit score over time, starting with the steps I’ve recommended above. Good luck.

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