A bad credit rating can be the result of poor decisions or bad luck. Either way, late payments or collections can remain on your credit report for seven years, affecting your credit score and ability to obtain a favorable interest rate or even get credit at all.*
Fortunately, you can work on rebuilding your credit. Here are some tips.
- Check your credit report. You’re entitled to a free report once a year from all three major credit reporting agencies (Equifax®, TransUnion® and Experian®) online. Review your report and contact the credit agencies immediately if you find errors. According to the Federal Trade Commission, 25 percent of consumers have found errors on their credit reports that could affect their credit scores.**
- Pay bills on time every month. Even if you can pay only the minimum, a record of on-time payments helps improve your record. More recent payment histories will weigh more heavily on your credit score than older information.
- Contact creditors if you’re behind. If you can’t pay the minimum, talk to your creditor to see if you can negotiate a smaller monthly payment. Often creditors would rather lower the amount due each month than hand your debt over to a collection agency. You may also consider pursuing personal finance counseling, which can help you get back on track.
- Don’t open new accounts. Although you may be tempted by store cards that offer discounts and other perks, they generally have very high interest rates—often 20 percent or more. You’re better off sticking to one low-interest-rate credit card than charging to multiple accounts.
- Don’t close old accounts. If you have older accounts that you’ve paid off but no longer use, leave them open. Lenders look at how much credit you have available and the length of your credit history versus how much you owe, so these will help your available credit number.
- Pay off fines. Even small outstanding debts such as library fines and speeding tickets could damage your credit rating.
Helpful Resources for Rebuilding Your Credit
Rebuilding your credit takes time and patience, but Navy Federal can help. If you’re considering a debt consolidation loan to reduce your total monthly payments and interest charges, click here to visit Navy Federal’s website and explore loan options. You may also want to consider transferring existing high-interest-rate credit card balances to a low-rate credit card. Click here for more information about Navy Federal credit cards. With the right tools and mentality, you may be able to improve your credit score faster than you think.
*Source: Myfico.com. **Source: Federal Trade Commission, press release, Feb. 11, 2013, FTC.gov.