Even if you had an excellent credit score a few years ago, it might not be in the same range anymore.

It is not uncommon for credit scores to fluctuate, especially as your finances change. If your score only moves a few points up or down, there is rarely cause for alarm. However, if you suddenly find that your good credit score is now only in the “fair” range it is time to take some positive actions.

 

5 Easy Tips to Improve Credit Health

 

Your credit health can decline for several reasons that can include delinquent payments, over or under use of credit accounts or even if you’ve recently applied for an auto loan.

Multiple inquiries generated by bad credit auto loans are one of the most common reasons for a sudden drop in a FICO score.

The good news is that this will only affect your credit score for a relatively brief period of time, and usually does not factor into a loan approval decision.

If your credit health is declining for other reasons, you don’t have to wait years for your score to improve. There are some quick fixes you can apply to legally repair your credit health.

 

Apply for a higher credit limit

It only takes a few minutes to apply for a higher line of credit, and this simple step could help raise your FICO score.

Increasing the limits on a charge account can lower credit utilization, which will have a positive effect on your credit scores.

Increasing your credit limit can also have drawbacks, and it is not always the best option for everyone. If you have a subpar credit score or have missed more than one payment in the last three years, your chances of approval are minimal. The inquiry into your credit history by the potential lender could cause your score to drop a few more points. If your bad credit history is due to overspending, increasing the amount you are allowed to charge might not be the best financial decision.

Write an adjustment letter

One overdue payment can send a healthy credit score into decline. It can also take three to seven years to remove it from all your credit reports. Regardless of whether you simply forgot to send it in or experienced a temporary financial setback, your credit history now has a black mark.

This single black mark can affect everything from your ability to get a low interest rate on a car to your chances of being approved for an increased line of credit.

If you have a history of making your payments on time, there is a chance the black mark can legally be removed. You can take the time to write a “goodwill” adjustment letter and request to have the late payment removed from your history by the lender. The letter should include the following details.

  • Brief explanation of why the payment was late.
  • Provide proof of your customer loyalty. (years account has been opened).
  • Describe positive history, before and after the delinquent payment.

There is always a chance that the lender won’t remove the late payment from your credit report, and this is their legal right. If they do deny your request, your only option is to wait until it falls off in a few years.

Pay down credit debt faster

Your credit utilization rate comprises 30 percent of your FICO score, and keeping your monthly debt low can help boost declining credit health.

Paying down your credit card balances every month can have the added benefit of lowering the amount of interest you are paying.

Credit Karma and the other reporting bureaus do recommend keeping your utilization rate under thirty percent. This shows that you know how to use and effectively manage credit. This is also one of the factors that often determines loan approval, and accompanying interest rates. For optimal improvements and to keep your FICO score healthy, financial experts state that your credit usage versus debt ratio should be around 12 percent.

If you have multiple credit cards it is always best to work on paying off the ones with the highest interest rates. It is important to remember to not rely on your other credit cards when paying off balances with higher interest. If you overuse the cards, your credit utilization rate will increase again. This can result in an unhealthy decrease in your credit score.

Transfer balances to low interest credit cards

There are two ways that you can transfer balances to credit cards with lower interest rates. The first method is the easiest, pay off the credit cards with the highest interest rates with ones that are lower. This can make it easier for you to pay more on the balances since less will be going towards interest. The downside to this method is that initially you’ll credit utilization versus debt ratio will increase, and this will affect the health of your FICO score.

If your existing charge cards all come with higher interest rates, you can apply for new lines of credit.

Many lenders offer credit cards with introductory low or no interest rates, typically for one or two years. If your current credit history is healthy enough, applying for a low or zero interest card might be the best option.

It is important to remember that the low or no interest rate only lasts for a specific length of time, before significantly increasing. Financial experts recommend only transferring old balances to new credit cards if you are planning on paying it off in a relatively short amount of time.

Dispute any errors found on credit report

One of the most effective ways to improve your declining credit health, is to dispute any errors on your credit reports.

A single mistake on one can be the difference between a “fair” and “good” credit score.

You are entitled to one free copy of your credit report every 12 months from each of the three agencies. (Equifax, Experian and TransUnion) Each report can vary slightly, which is why it is important to keep up with all 3. Requesting a free copy of your report also won’t impact your credit score.

If any errors are found you will want to report it immediately to the credit reporting agency. Once the process has been started and if it is found to be an error, it will typically be removed from your report in 90 days or less. If the black mark is not found to be an error, you will have to wait until it falls off your report.

There are some credit repair agencies that claim to be able to remove these errors, but it is only a scam. It is illegal to taper with a credit report in any way, unless the change is made by one of the recognized credit reporting bureaus.

 

Hope for Declining Credit Health

 

Credit health can decline for multiple reasons, but this doesn’t mean that it has to stay that way.

With a little time and careful financial planning, you can legally boost your credit’s health.

If you have any additional questions or are thinking about applying for another line of credit it is always recommended that you speak with an experienced financial advisor.