As high as 90% of all lending decisions in the United States are based on your FICO credit score. This means if you are looking to get a loan, lease, or line of credit to buy a vehicle or house or pay for your college, personal expenses and business expenses, you must be prepared to share your credit score with your lender. With credit playing such a huge role in the big decisions in the lives of most people, it is very important you maintain good or excellent credit.
In February 2013, the Federal Trade Commission released the results of a comprehensive credit report study, where one in four consumers had errors on their credit reports. Errors on credit reports can lower credit scores, raise interest rates for existing loans and prevent you from receiving new credit or loans.
When you are serving in the military, especially if you are stationed overseas, your credit score may not be a high priority for you. However, it does impact important financial decisions you will make. Hence making it a priority and staying on top of it is essential.
Bad Credit Isn't the End of the World
If you have had bad credit or your score has fallen, don't despair. It is not the end of the world. But you may not be able to get that loan, lease or new credit card you want right away. You will have to work for it.
Thankfully you can repair and improve credit, placing yourself in a more favorable light to lenders for any credit scenario through discipline and effort. Repairing credit and raising credit scores is not instantaneous. There isn’t a quick easy fix. It takes time. Just like losing weight takes consistent effort, raising your credit score does too. (For related reading, see: 5 Things That Are Hard to Do With Bad Credit.)
The most important decision that you will make regarding your credit is how you manage your credit responsibly over time. The first thing you should do is to check your credit score. Every year, you are entitled to a free credit report from Equifax, Experian and TransUnion. Visit AnnualCreditReport.com for your free annual report. Go ahead and order these reports so that you can check them for any errors and make sure they are up to date.
Check Your Current Credit Report
After you have requested a credit report from each credit bureau, take a close look at them. Check to see that the information is correct, including the payments listed to your accounts, their status (open or closed) and your personal information. If you find any errors, fill out a dispute with them online. Each credit bureau may take some time to review dispute information submitted online, but you will see incorrect information fixed through your diligence. Be sure to follow up if changes are not made within 30 to 45 days.
Set Up Payment Reminders and Pay Bills on Time
This step can be very helpful because it prevents you from making mistakes. With payment reminders you can make your credit payments on time, which is by far the most important factor in your credit score, accounting for up to 35% of the score’s makeup. You can also consider doing automatic payments to ensure your payments are done on time. You will however still want to make additional payments beyond just the minimal amount in order to genuinely pay off any debt you have. While you may have paid bills late previously, be sure your payments are on time. It will show in your account over time. Paying bills consistently over time will positively impact a credit report and score.
Lower the Amount of Debt You Owe
This takes time and diligence but is very satisfying too and can have a dramatic impact upon your credit score. Start by no longer using your credit cards and then paying them off with a payment plan that targets the cards with the biggest balances and higher interest rates while still meeting minimum payments on other accounts.
(For more from this author, see: Buying a House? Here Are 6 Things You Need to Do.)