Too often people look at improving their credit score as an insurmountable task that may never come to an end. And who can blame them? The way credit scores work is a mystery to most people. In addition, the people who do understand how they work quickly come to realize that it can be long process that tests their patience. In spite of this, there are things you can do today that will help your credit score begin to rise. Here are aaacreditguide’s top 5 tips for beginning to improve your credit score – today.

1. Start paying your bills on time from now on. There’s an old saying that goes something like this: “If you don’t change your course, you will arrive at where you are going.” This saying will hold true for your credit score as well. If you find yourself constantly struggling to make minimum payments and pay bills on time, the right time to start doing so is now. Once you stop the patterns that have led to you having a low credit score, your credit report can actually recover relatively quickly. It can be an exciting thing to check your credit score every few months and watch it climb continually.

2. Request a copy of your credit report from each of the big 3 credit reporting agencies. You need to know what things are hurting your score in order to know where to focus your efforts in the future. In addition, there may be simple errors on your credit report that you can have removed.

3. Develop a personal budget. The No. 1 key to financial success is to spend less than you make. An ancient proverb says that if you make five dollars and spend four, you will have a happy life – and if you make five dollars and spend six, you will have an unhappy life. This may be oversimplifying things a little, but generally speaking, this principle usually holds true.

4. Pay down your high interest loans and credit cards as fast as possible. Once you get your finances under control it’s time to start actually paying down the accounts you owe money on. Start with smaller debts and accounts that have the highest interest rates. From there, work up to the larger debts and lower interest rates. Few things ensure prolonged financial difficulties as much as simply paying the minimum payments on your credit cards and other financial obligations.

5. Find ways to save money. I understand that people do not choose to miss payments, or have a low credit score. Bad credit and most other financial problems happen as a result of having too many bills and too little money. There are only two fixes to this overarching problem – first, you can start making more money (which can be tough to do), or second, you can start spending less money (which is much easier to do). By spending less money, you can free up your extra income to pay down debts and save for a rainy day.

When I was going through trying economic times in my own life, I was able to cut my monthly expenses in half by doing the following things:

- I sold my car that I was making payments on, and paid cash for a less expensive car. This saved me more than $150/month, and I like my new car almost as much as the old one.
- I shopped for less expensive options for my health, and auto insurance premiums. I cut my auto insurance premiums from $120/month to $55/month by doing this.
- I stopped eating out, and started making meals for myself. I went from spending on average around $15/day on food to spending about $20/week on food.
- I stopped making purchases on things I didn’t see as necessities. I used to spend as much as $100/month on clothing, now I almost never buy clothes and when I do it is from thrift stores.

The result of these changes led to greater financial independence in my life and it also helped me to clean up my credit. The best part about it is that I don’t feel like my quality of life has gone down at all. These are things everyone can do, and I hope that you will give them a shot if you want to repair your credit score.

Using Your Credit Can be a Good Thing

Your credit score does not correlate directly to your financial well-being. You could have a bad credit score and actually be very financially stable. Conversely, you could have a good credit score and still struggle with your finances. Because credit reporting agencies cover such a wide array of people, credit reports do not always give the best portrayal of reality. Because of this, it is important to understand how credit works so that it can benefit you as much as possible.

Your credit score is based off of several factors, including:

• If you make payments on time.
• The amount of credit you have available to you.
• How much of your available credit is currently being used.
• How much of your available credit you have used in the past.
• How many lines of credit you have open.
• How long those lines of credit have been open.
• How many times you have failed to live up to your financial obligations in the past.

Because your credit score is based upon these factors, it would be detrimental to completely neglect your credit by purchasing things solely with cash.

How to Make Credit Work for You

Since we know that credit isn’t something that we can simply ignore, you can make credit work for you by following a few simple principles:

• Never buy things you cannot afford.
• It is safe to purchase things with a credit card, however make sure that you have the money to pay off the balance of the credit card each month.
• Do not close out old bank accounts and lines of credit. If you have things paid off, that is great, just leave the account there with a 0 balance. Credit reporting agencies look at how long your accounts have been active.
• Get a credit card that offers you benefits. Benefits may include cash back, frequent flier miles, discounts, and protection on the purchases you make.
• Never sign up for a credit card with an annual fee. There are enough free options out there that you shouldn’t ever need to pay an annual fee.
• Make sure that your checking account has overdraft protection.

Don’t Let it Get Worse

If you find that you do struggle with controlling your spending when you have a credit card or other sources of credit, by all means do not use credit to make purchases. Abusing your credit will always catch up to you. In addition, you will always pay more back to the credit card companies than you were able to purchase. However, the ideal situation is when you discover that credit is your friend and that you can use it to help you.

Under the new credit card regulations, companies are forbidden to change interest rates on pre-existing balances for fixed-rate credit cards. However, many credit card companies are switching to variable rate cards for most of their customers. This means that as the prime interest rate rises, so will the amount of interest you pay on your credit cards. This ultimately leads to higher balances which are harder to pay off, and in turn can damage your credit score by causing you to utilize more of your available credit limit than you normally would.

If your credit card company switches you from a fixed-rate credit card to one with a variable interest rate, you can reject the change. However, in most cases this means that your credit card will be canceled at the end of the current agreement cycle. When this happens, if you’re still carrying a balance on the credit card your credit scores will drop due to the fact that your credit report will show a balance higher than your available limit on that card.

When dealing with a credit card that has been switched to a variable interest rate, it’s generally in your best interest to continue making payments until you have paid the balance of that credit card entirely. Then, if you decide to cancel the card you can do so without having as much of a negative effect on your credit report. Currently, because interest rates are generally low, you may even be able to save money versus your fixed interest rate, assuming you can pay the card off in only a few months.

Another option which may help you to keep your credit scores healthy is to pay off the variable rate card, and then use it for purchases that you can pay in full each month. This will help to prevent any reduction in your credit limits, as well as avoid ‘inactivity’ penalties that some banks have begun to assess. If you have credit cards that you haven’t used in several months, now is the time to do so. Make a small charge to keep the account active, and pay it off as soon as possible. Otherwise, you run the risk of owing fees due to inactivity, which can pile up and cause late payments and higher interest rates overall.

Regardless of whether you decide to keep the account or close it, the important thing to remember is to keep the account open until the entire balance is paid off. In this way, you’ll avoid a major hit to your credit scores, which will save you money on any new credit that you apply for.

Tip 1: Avoid Excessive Hard Inquiries on Your Credit Report

If you are shopping for a loan, avoid applying to several different places and waiting to see what offers you receive. Multiple credit report inquiries in a short period of time can lower your credit score, even if you have an otherwise clean history. If you have your credit score, a better option may be to shop around without filling out the loan application until you’ve narrowed down your choices. If you know where you fall on the credit scale, then you can make a reasonable estimate as to the amount of interest you’ll be expected to pay and the terms of your loan. Regardless, it pays to keep the hard inquiries to your account to a minimum if you are trying to raise your credit score.

Tip 2: Be Alert for Potential Errors in Your Credit Report

This is a tip that may best be facilitated through working with a credit repair company. If you have errors on your credit report that are harming your score, you have the right to dispute these errors and have them corrected and/or removed. If you don’t recognize an account, or if there is erroneous information about the account, a reliable credit repair agency will be able to successfully contest the negative information on your behalf. Cleaning up your credit report will allow you to focus on taking care of any remaining negatives without having to worry about incorrect information having an impact on your credit score. If you believe that you may be a victim of identity theft, then you should also file a police report and notify the credit bureaus as soon as possible – minimizing the damage done by identity theft is essential to any credit repair process.

Tip 3: Work with Your Current Lenders

If you have some accounts that are in less than stellar shape, but that aren’t in dispute, consider trying to negotiate with your current creditors. This can be done through a credit counseling agency in some cases, but you may also be able to work directly with the lender if you have an established relationship that is mostly positive. One particular aspect you may wish to ask about is re-aging. Re-aging is a process that will get rid of your past due account by making it appear as “current” on your credit report. While federal laws dictate how a creditor may re-age your account, in general if the account is over 9 months old, and if you have made 3 consecutive payments and have demonstrated a willingness to continue to make payments, then re-aging should be an option for you. Creditors sometimes use re-aging to make an old debt look new, but if you’re planning to pay, it’s in your best interest to request that the account be re-aged. It’s quick, it’s free, and it gets rid of all the 30, 60, 90, and 120 days late notations for that account if you keep the payments current.

No matter what route you take with regards to repairing your credit, following these tips will help you to improve your score in a manner that is both ethical and long-lasting. Many credit repair companies can provide additional information and counseling about these techniques, and give specific advice tailored to your particular situation.