How to Get Your Credit Score Healthy in 3 Years

Your credit score is an important part of your financial life. People with high credit scores get better interest rate offers on loans and credit cards and also have an easier time renting apartments. If your credit score isn’t as high as it should be, you can work to raise it, but it won’t happen overnight. Here are some things you can do to get your credit score healthy over three years.

Check your credit report for errors

If your credit score is lower than it should be, it might not even be your fault. Creditors and credit bureaus sometimes make mistakes when they are recording information about your account. Take advantage of the free credit reports you are entitled to each year from the three major credit bureaus. Once you get them, look for major errors that can affect your credit score, such as accounts being reported past due when they are current or open accounts being reported as closed. If you find any errors, dispute them right away in writing to both the creditor and credit bureau.

Cure any defaults and past-due accounts

Nothing hurts your credit score more than not paying your bills on time. And the farther behind you get on paying your credit accounts, the worse off your score will be. If you have past-due accounts, bring them current as soon as possible. And if you have any accounts sent to collections, pay off the amount as soon as possible. Such black marks will stay on your credit report for up to seven years, but over time their importance in figuring your score will diminish, and if you bring them current right away, in three years their effect on your score should be minimal.

Pay down debt

Even if you make all your loan and credit card payments on time, those accounts can still hurt your credit score if you carry a lot of debt. After late payments, carrying too much debt is the factor that most hurts your score. Credit bureaus look at something called your credit utilization ratio. It measures how much of your available credit is used each month. You want to keep that ratio below 30 percent, meaning if you have $10,000 of credit available, you should keep your ongoing balance below $3,000. Keeping your debt levels low also saves you money because you don’t pay as much in finance charges.

Don’t open and close too many accounts

When you are offered a new credit card, the temptation is always there to take advantage, whether it’s a store brand card that will get you a discount, or a new card offer in the mail that will get you rewards. You want to be careful about opening too many accounts, however. Opening a bunch of accounts at once can lower your credit score slightly, and having too much available credit can make you look risky to potential lenders. On the other hand, you don’t want to close accounts if you don’t need to, especially if they are ones you have had for a long time. Closing an account does nothing to remove any negative information, and you will lose the positive history of that account over time.

Use your credit responsibly

The best way to get your credit score healthy is to always use the credit you have responsibly. Don’t open too many accounts, don’t get behind on payments and don’t run up a huge pile of debt. If you do so after you have worked hard to rehabilitate your score, your work will be for naught, and you will have to start over again.