How can you improve your credit rating and borrowing power?
A new study of consumer credit scores shows improvement nationwide. In its annual “State of Credit” survey, credit services company Experian reports that the average credit score increased four points since last year, to 673.
Wisconsin scored particularly high marks, with four of its metropolitan areas ranking in the top ten in the country— Green Bay (4th), Wausau (5th), La Crosse (8th) and Madison (10th).
Better Management of Debt by Consumers Played a Role
Modest economic growth and a national unemployment rate of around 5% may have contributed to the slight improvement. While scores have gone up, so has the amount of borrowing. Average credit card balances have increased over $1000 from $4,404 last year to $5,551 this year. Still, better management of debt and payments enabled credit scores to improve overall.
According to Experian, 673 is above average, while 720 to 50 are “prime” scores, and anything beyond, “super prime.” Better scores mean lower interest rates and easier approvals when renting an apartment, signing up for phone services, or engaging in other commercial transactions.
How to Improve or Repair A Poor Credit Score
If your credit score isn’t as high as you would like, there are a number of steps you can take.
- Request a free credit report online. These are available from many sites. Check your report for errors and, if you find any, bring them to the attention of the credit agency.
- Set up reminders or automatic bill payment to avoid late payments. This can be done usually through your bank’s online payment site or through the sites of companies billing you.
- Try to reduce the amount you owe. While difficult, this is will yield many financial and emotional rewards. Short-term strategies, such as transferring balances to a new credit card, will ultimately backfire and worsen your credit rating.
- Remember that your credit history stays with you for as long as seven years. Closing your account with a company will not erase records of missed payments or collection attempts.
A Repayment Plan or Personal Bankruptcy May Be an Option
Improving credit is easier said that done. Many people may need professional advice to deal with creditors and devise a payment plan. For some, personal bankruptcy under Chapter 7 of the Bankruptcy Code or a reorganization of debt under Chapter 13 (a so-called “wage earner’s plan”) may be a necessary stage on the path to financial recovery. If you are experiencing difficulties with your credit, an attorney experienced in personal bankruptcy law can help you find the best strategy for eliminating debt and rebuilding your credit.