It should come as no shock to find out that household debt continues to rise. Estimates say total household debt in America as of March 2018 is 13.21 trillion dollars. Because of such heavy debt, more and more Americans find themselves with falling credit scores and they don’t know how to fix it.
In this article, we look at how people get into debt, and how to get your credit score going in the right direction.
The two most common causes of credit problems are foreclosure and bankruptcy. Next to those, carrying too much debt and being late on payments add to the problem people have with credit.
Now we’ve seen some reasons we get into trouble with debt and credit, let’s look at how to get out and get our credit score repaired and headed in the right direction.
Tips For Rebuilding Your Credit
Make Payments On Time
Experts say 35% of your credit score is determined by your payment history. Late payments are the number one reason your credit score takes a hit, so even if you’ve been late in the past, it’s time to start making payments on time every month to get back in the right direction. Every time you make a payment on time, your credit score goes up a tick, so keep it up and you’ll see your score improve in no time.
Bring Delinquencies Up To Date
Another large aspect of your credit score (30%) is comprised of your credit utilization or what’s called your credit to debt ratio. If you have accounts that are delinquent — even ones that are closed — work hard to bring those accounts current and then pay them off quickly.
Pay Down Your Balances
By now, everyone should know that making the minimum payments every month gets you nowhere fast. So, to improve your credit score and pay off your debts more quickly, pay more than the minimum every month.
Keep Accounts Open
Many people think it’s wise to close an account once it’s paid off, but that actually hurts your credit score. Your credit history comprises 15% of your credit score. So let’s say you have a 10-year-old account and you close it; now you’ve wiped out 10 years worth of payment history, and that looks bad to credit reporting agencies.
Mix Up Your Credit
Don’t Take On New Debt
The last thing you should do when your credit score is going the wrong direction is to take on new debt. Instead, work on paying off what you owe before opening a new line of credit.
While it won’t happen overnight, if you’re diligent, make your payments on time, and pay down your debt, you’ll be surprised at how quickly your credit climbs up in the right direction.