How to Improve Your Credit Rating

So you've had a few problems getting the bills paid lately, and you're wondering what you can do to repair the damage.

You've got plenty of company. There are more than 30 million people in the United States with credit blemishes severe enough (and credit scores under 620) to make obtaining loans and credit cards with reasonable terms difficult.

Or maybe your credit is OK, but you'd like to make it better. After all, the better your credit, the lower the interest rates you can secure car loans and credit cards. And these days, having high credit scores is the one sure path to homeownership.

Bad credit can hurt you in a lot of different ways and it is important to find a way to improve your credit score so you can get the loans and financing you need for things that matter to you. There are many things you can do that are simple and effective, here are a few:

Keep your credit balances low:

Thirty percent of your credit score compares your total amount of credit to your level of debt. This is your credit utilization or credit-to-debt (CTD) ratio. Since lower ratios mean higher credit scores, a ratio of 30% or less is ideal. Why? Creditors view higher balances as a sign of financial overload.

Here's how it works in practice. If you have 3 credit cards with each with a $1,000 limit and balances of $600, $800, and $900, your total CTD ratio will be about 77%. This is dangerously high. You should bring those balances down to $300 or less to increase your score.

Be careful. Closing your accounts doesn't hide the credit card balance from the ratio. Instead, it leaves the balance and "hides" the credit limit, making your ratio skyrocket while your credit score plummets.

Check your credit report:

Credit history may reveal several qualities of an applicant's financial status, such as debt load and potential debt load. The employment credit report can identify the possibility of financial problems that may adversely affect an applicant's performance on the job.

Do not make late payments:

Missing payments has a major negative impact on your credit score. Be sure to always make your payments on time. A good strategy is to setup some type of automatic banking bill payment system, simply visit your local bank and ask them about setting up an auto bill payment system as most banks will be able to do this for you easily. This is particularly useful for those that have a tendency to forget about making monthly payments and will help to simplify your life and also can save you time.

Make bigger monthly payments:

The problem with a large credit card balance is that the monthly minimum is barely enough to cover interest on most credit cards.This means that if all you do is pay the monthly minimum on your credit card then you will have a really hard time bringing the balance down as you are paying primarily for interest. You may be broke so look to getting money from lower interest loans like a line of credit or if you own a home you could look to refinance and take out some equity so you have more cash on hand.