“The secret of getting ahead is getting started. The secret of getting started is breaking your complex, overwhelming tasks into small, manageable tasks, and then starting on that first one.”
Now, on to those small, manageable tasks.
Request a copy of your credit report and comb for errors
In 2013, the Federal Trade Commission shared findings that roughly one in five consumers carries an error on their credit report. Find an error? Dispute it. Removing negative marks made in error will help you return to your correct score.
Write a negotiation letter to your credit bureau
Better yet, contact the company reporting a late payment to ask if it will campaign for the removal. If a payment was incorrectly reported (see above), or if you simply forgot a bill when you’re usually 100% on the ball, you may be able to get the late payment removed.
Lower your credit utilization to decrease your debt-to-credit ratio
Traditionally, you can lower your credit utilization rate two ways:
- Lower your spending.
- Increase your credit.
A large portion of your credit is calculated by the amount of debt (credit card and loans) compared with your credit limits. Go back through your spending and consider whether you’ve spent more than the recommended amount of your credit line (generally around one-third of the limit).
Alternatively, you can request an increase in your credit or open a new card as a way of increasing your credit-to-spending ratio, BUT (you knew that was coming, right?) this is a risky move if it also results in an increase of spending. Be wary of raising limits if it wouldn’t be financially feasible to pay back any and all spending.
Resist applying for multiple forms of credit in a short time
Each time you request a new form of credit (think outside the box of credit cards here too: car loan, home loan, etc.), you’ll likely face a credit inquiry. Too many inquiries within a short time, and the credit bureaus may ding your credit.
Keep this in mind as you request increases to your credit or open up new cards. Both actions may result in one too many credit pulls and consequently, a decrease in your credit score.
Be proactive in settling late payments — then automate your payment schedule
I know firsthand that timely bill pay is gut-wrenching when you’re financially strapped. This tip is less about paying your bills on time and more about proactivity in settling bills.
Credit bureaus count a late payment starting from the first day of your last late payment, so the sooner you can square the bill and keep squaring the bill, the better. This is particularly true if you can pay off past-due debts before they reach the 30-day, 60-day, or 90-day thresholds. It’s scary to confront the financial challenge, but it’s doable.
Once you’ve settled any late payments, make future payments even easier by automating. Automation avoids accidental missed payments and takes the mental clutter of scheduling multiple payments off your mind.
Building credit builds long-lasting habits
One of the biggest secrets to the game is to understand that it is kind of a game. A serious game, absolutely, but inclusive of tactics and strategies. Approaching the task with the long-term-training mindset helps you build long-lasting habits that strengthen your financial foundation.