Improve Your Credit Rating

Maintaining a good credit rating cannot be overstated. If your credit rating is poor, your buying power decreases with increased borrowing rates. This can add up to thousands of dollars when buying big ticket items such as a car. Some prospective employers routinely check your credit rating and a poor credit rating may affect your employability. Even if you always pay your bills on time, identity theft has become such a problem, you must check your credit report regularly to be sure there aren't debts listed that don't belong to you. Here are effective ways to improve credit ratings that also save you lots of money.

Many online services offer free credit rating reports from the three major credit bureaus. Look your credit report over carefully to be sure every item listed belongs to you. If you see a debt that isn't yours, write to that creditor, asking for proof that you incurred the debt. The creditor must provide proof within 30 days. If no supporting documents are provided, the item must, by law, be removed. Your credit rating is thus improved.

Perhaps you have legitimate unpaid debts. Contact the creditors and make payment arrangements, if the debts are large, or simply pay in full. Submit a statement of explanation to the credit reporting agency. For example, you can state that you were out of work, unable to pay, but have paid in full on (date). Again, your credit rating improves.

Let's say you fully intend to pay your debts, but have overextended your means to pay by maxing out credit cards. Now, hard-pressed to make minimum payments, mounting interest charges soon overwhelm your pocketbook. With multiple credit cards, it's sometimes best to move all your debt to one card with the best interest rate. Credit card companies may be willing to negotiate a reduced interest rate, but you must ask. Non-profit consumer counseling services charge a small fee, but are often quite successful in reducing your monthly payments and interest. Any of these strategies lead to an improved credit rating.

If you usually pay cash, your credit rating may be poor for lack of history. To improve a credit rating in this scenario is relatively easy. Apply for a gasoline credit card and one or two department store credit cards. With a low initial credit limit, establish a good payment record by paying your bill in full each month. Six months is usually all that's required to improve your credit rating and get a major credit card at a good rate.

With all credit, creditors are looking for consistency. Use your cards only for purchases you can afford to pay each month. For larger purchases, make the agreed payment on time. You'll soon be on the road to solvency and a much improved credit rating.