So you’ve got bad credit…

A close friend of mine recently told me “when i was younger I figured I’d have high income so I foolishly didn’t care about credit.” This comment caught me off guard to say the least. But I felt for him. 7 years ago, the same thoughts were running through my mind. Below I have highlighted a few ways to improve your credit score that I ran across over at Bad Credit Edu:

1. Retrieve a free credit report
Everyone is entitled to 3 free credit reports per year. You can get a free report from each of the 3 major credit reporting agencies at Annual Credit Report. If you view one every 4 months, you can spread out the 3 free credit reports over the year to get the most out of this free service.

2. Make sure positive accounts are listed in your credit report
Credit bureaus will almost always show negative information on your report (if it exists). Make sure your positive accounts are listed also. Some creditors will not show positive information on your account for the fear of a competitor taking you away from them. So make sure all of your accounts with positive information are listed.

3. Piggy back on a positive credit history
If someone adds you as an authorized user on their credit card and they have good credit, your credit score will almost immediately improve. If the person has a negative credit history, the same result can apply, so serve caution. One benefit of piggy backing on someone elses credit is you will not be held liable if the person runs up a huge debt. I’m not saying run up a huge debt and leave the person to be held liable for it. If they are willing to help you, consider it a financial obligation. Respect it.

4. Use credit cards (and apply for a couple if you don’t own any)
The key here is to use the credit cards for normal monthly expenses. Utilities, gas, etc. And most importantly, PAY OFF THE BALANCE IN FULL EVERY MONTH. Paying off your credit cards in full every month will create a track record of on time payments, which in turn will improve your credit score. If you cannot pay your credit card bill in full every month, you will start accumulating interest and debt, and this is what we are trying to avoid. 

5. Apply for a secured card
Secured cards work sort of like a prepaid credit card. You can find secured cards that report back to the credit bureaus and built credit on them. The key is to find one that doesn’t charge fee’s and as low of an annual fee as you can find. The ideal situation would be to find one that becomes unsecured after a certain time period, usually 12 months.

Remember to not apply for too many credit cards at once as this can hurt your credit score. You should start with one credit card (possibly the Chase Freedom card I currently use). Pay all your bills on time and build some credit. If you have too many credit cards to deal with, maybe consolidating them all onto a personal loan is the way to go.