Low credit scores can affect the cost of borrowing, your ability to rent an apartment or even whether you can get a job. But what can you do if you have a low score?
In most cases, consumers can do a lot to improve their scores on their own. Although some companies claim they can help you get a better score, there's really nothing they can do that you can't do yourself - and without paying for assistance.
Consumers with too much debt, whether student loans, credit card debts or other loans, need to start by figuring out how to pay back their creditors. First, develop a workable budget and talk to creditors about a payment plan if you can't pay them off promptly.
A reputable credit counseling service, such as Clearpoint Financial, can help you develop a budget. You may find classes on budgeting at a local community college or even a county extension office.
If you have simply missed a payment or two, you can work to improve your score by using credit wisely. Pay bills on time, and if you're tempted to buy something with a credit card, make sure you don't spend more than you can repay within a month. Late fees and interest charges can make add to your debt and challenge your ability to repay.
Check your credit report online by going to annualcreditreport.com. The three credit reporting agencies are required to provide you with a free report once a year through this website or by contacting Experian, Transunion or Equifax on phone numbers available at the site. Consider staggering your requests among the three agencies so you can check your credit report several times a year.
Be cautious of websites that claim to offer free credit reports. Some will entice you to buy other products or services.
Take a good look at the report to make sure all the creditors listed are ones you have used. If there are unfamiliar creditors, contact them and find out more about what they allege you owe and any proof of the debt they have. Remember that some creditors may show up on the report even though you no longer owe them money. Report any errors to the reporting agency and ask for them to be corrected.
Keep all of your original documents, especially receipts, sales slips and billing statements, to make sure they match. You may need them if you dispute a bill or report. If the credit agency requests documents, send copies; never send your originals. It may take more than one letter to correct problems, so keep copies of all your letters.
Be persistent. If your credit file contains errors, you are entitled to have it investigated by the credit bureau. The credit-reporting agency must give you a written report of their investigation - and a copy of your report if the investigation results in any change.
Cleaning up errors on your credit report can take time and effort, but it will help you improve your credit score in the end.
Better Business Bureau has advice for setting budgets and more information on credit scores at bbb.org.
Chris Thetford is vice president of communications and marketing for Better Business Bureau in St. Louis.