by Emily Hechler 
Many of us learn the hard way in life. Several little mistakes or unfortunate situations can lead to a poor credit score. Unintentionally lowering your credit score is easier than raising it. Who doesn’t want to drive the newest car, buy luxurious home décor and eat at fine dining restaurants regularly? If you’re stuck with a low credit score, taking the steps to raise your credit score can be beneficial in the long run. Here’s how you can come back from a poor credit score.
Pay bills on time. Missing the payment deadlines for bills will quickly decrease your credit score. A good credit score is established by paying every bill on time. This applies to auto loans, student loans, credit card bills, and more. An easy way to ensure you make your payments on time every time is by setting up automatic payments with online and mobile payments.
Keep credit utilization low. Just because you can use your credit card to make a purchase doesn’t mean you should. Smart credit card users only use about 30% of their available credit each month. Using too much of your available credit can decrease your credit score. Plus, lower balances are also easier to pay off.
Avoid opening too many accounts. While credit unions offer accessible banking products, chances are you probably don’t need all of them to improve your financial situation. When you apply to open a new auto loan, credit card, or other lending product, the financial institution will run a hard credit check. This credit check helps the lender determine if you are a responsible borrower. However, this process will decrease your credit score by a few points each time. By only applying for necessary loans, you can help prevent your credit score from decreasing.
Pay more than the minimum payment. With any loan or credit card, the minimum payment is what keeps you on track to paying off your balance on time. This also keeps your credit score from decreasing and instead can help it rise. Depending on the loan, your interest for each month may only be slightly less than your minimum payment. With most of your payment going toward interest and not the principal, you’re barely chipping away at your loan balance. By paying more than the minimum payment each month, you pay more money toward the principal, getting you out of debt faster. Plus, this helps increase your credit score too.
Avoid carrying a balance. It can be easy to make everyday purchases with your credit card and not pay off the balance for months or years later. This balance keeps your credit score from increasing. By paying off your credit card in full each month, you can avoid paying high interest fees and reduce your debt-to-income ratio. A lower debt-to-income ratio creates opportunities for a higher credit score.
Dispute inaccurate information. When you receive your bill each month for your various payments, carefully review your month’s history. Make sure all charges are valid and that your interest is calculated appropriately. If you made more than the minimum payment, make sure your balance is correct. If you notice any fraud or suspect of an incorrect change, contact the credit union. We can help determine any mistakes or catch suspicious activity to keep your credit score from decreasing.
While these steps are easier said than done, implementing what you can is a great way to start. By consistently following these tips, you can raise your credit score over time. If you need financial counseling for personalized guidance, our financial counselors can help.
