Spring Cleaning – How to Clean Up Your Credit

Spring has sprung!  This is a great time of year, especially here in the Midwest where we’ve just had a pretty rough and snowy winter.

It’s nice to have a little warmer weather, see some neighbors outside and hear the birds chirping.  It’s a great time of year to start some spring cleaning too!

My wife and I moved into our new house a couple months ago and our garage is an unorganized mess.  We’re looking forward to a warmer weekend so we can spend some time cleaning out the garage and getting things in order.

It’s also a great time of year to check credit score, tidy up and get some clean credit.

Since we’re launching into the house hunting season and soon it will be graduation season, many folks should be thinking, “Hey, I better check my credit score before I find a house, apartment, or car etc.”

So, here are some tips to help you clean up your credit:

Get Free Credit Report

Getting an idea of what your credit score is has become so much easier now with government legislation that gives everyone the right to request one free credit report each year. 

Now, be careful there are a lot of scammers out there that publicize themselves as free - they might even have really catchy commercial jingles that advertise free credit reports, but in the end you have to sign up for a monthly service and pay them a fee.  Stay away from those!

I highly suggest visiting annualcreditreport.com to request your free copy.  AnnualCreditReport.com is the official site to help consumers obtain their free credit report. 

Knowing where you are will help determine your next steps.

Clean Up Errors and Old Information

This is huge.  For some reason, things dont’ always get updated, so you’ll want to check your report carefully to see if there is any outstanding information that shouldn’t be showing up. 

Perhaps an old doctor bill or credit card still shows a balance.  Maybe they’ve got an account listed with an ex-spouse or someone you cosigned for. 

You’ll want to check for accurate credit limits from your card issuers as well.  Just doing this will help improve your credit score.

These things can typically be taken care of with a phone call to one or more of the reporting agencies. 

Experian – 888-397-3742
TransUnion – 800-916-8800
Equifax – 800-685-1111

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Make Sure You Pay Your Bills On Time

Ok, do we really need a reminder of this?  I would hope not, but it is amazing that many folks think being a couple weeks late on their payment is no big deal as long as they are paying something. 

According to MyFico.com, payment history makes up 35% of your credit score.   An article in CNN Money points out that “someone with an average credit rating of 707 can raise their score by as much as 20 points by paying all their bills on time for one month.”

The longer you go without making a payment, the more you flush your credit score down the toilet!

Don’t Close All Your Old Accounts

This may seem counter-intuitive, but closing old accounts will actually hurt your score.  This is because the reporting agencies want to see a nice long history of using credit. 

According to Fool.com, “lenders take a hard look at the ratio between the balances on your revolving accounts and your total available credit. If you do have debt, try to keep it to less than 30% of your available credit.” 

If you start closing your accounts, your debt-to-available-credit ratio goes up and actually hurts your credit scores. 

Now, some of those shopping mall store cards should be closed, but take note of the ones you have with a really long history and keep those open.

Get Out of Debt

As mentioned, lenders typically like to see a debt ratio of 30% or less.  No debt is obviously ideal! 

Get serious about improving your credit score by getting serious about eliminating debt, especially paying down those credit cards.  Managing debt responsibly will help boost your score tremendously.

Improving your credit score won’t happen over night, but with simple discipline and some practical steps you can start seeing improvement in a very short time.

What Are Your Thoughts?

How else would you improve your credit scores?

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