Restoring Your Credit Starts With Baby Steps
By: Jim Katzaman - Get Out Of Debt
Tags: Life Lessons, Money, Credit Score, Finance, Budget

Having lots of money means little if you have lousy credit. In fact, bad credit will increase your bills and significantly reduce the money you can save over your lifetime.

Christina Roman, consumer education and advocacy manager at consumer credit reporting company Experian, and Lawrence D. Sprung, certified financial planner® and president of Mitlin Financial, regularly come to the aid of people to get them on track with credit.

The financial experts touched on the different aspects of building good credit, which often starts with creating and sticking to a budget that best meets each person’s needs.

“Budgeting can help ensure you are able to pay all your bills in full,” Sprung said. “No late fees and no missed payments will help your credit score.”

A post on Experian’s blog explains how budgeting can help you improve your credit score and boost your overall financial health.

“Besides being great for your credit, budgeting prioritizes your spending,” Roman said. “This means you are really focusing on reducing or paying off your debt and paying your bills on time. This all benefits your credit score.

“It’s important to know that there are hundreds of credit scores,” she said. “The algorithms used to calculate the credit scores place emphasis on different factors.”

General factors used to calculate credit scores include payment history, credit use, length of credit history, credit mix and recent inquiries. Experian’s blog explains how credit scores are calculated.

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In a Mitlin Minute, Sprung presents his own video, “What Is Your Credit Score?”

“To start building credit for the first time, get a credit card, use it, and pay it off each month,” he said.

According to Experian, you can start responsibly building up credit in several ways: Get a secured credit card or become an authorized user on a family member’s credit card. The company’s blog explains how to establish credit for the first time.

“To improve your credit scores, check your credit report,” Sprung said. “Make sure it is accurate. Correcting any wrong items can help.”

One of the best ways to increase credit scores is to establish a track record of paying bills on time, paying down debt and taking advantage of tools such as Experian Boost.

“Focus on reducing your debt and paying your bills on time,” Roman said. “Don’t take on more debt while you are trying to improve your credit score. Give your score time to improve.”

Rebuilding a damaged credit score will not happen all at once.

“That really depends on the nature of the cause of the decrease,” Sprung said, referring to a Mitlin Money Mindset episode featuring tangible tips from Leslie Tayne, founder of Tayne Law Group.

Experian agrees that rebuilding credit can take time with no exact measure of how long you’ll wait to see results. As the company’s blog states, “It depends on your unique credit profile and what specific events damaged your score.”

The Experian blog goes deeper into how long it takes to rebuild credit.

To start restoring credit, the company recommends Experian Boost, which uses bank records to find on-time utility, phone and Netflix® payments, giving consumers even more opportunity to improve their credit scores.

About the Author

Jim Katzaman is a manager at Largo Financial Services and worked in public affairs for the Air Force and federal government. You can connect with him on Twitter, Facebook and LinkedIn.

Disclaimer

This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.