Fix my credit!” If you’re in need of credit repair, we’ve got you covered. Read on to learn how what it takes to repair your credit.
American credit scores are on the rise. The average credit score was 704, which is an all-time high.
Do you know your credit score? If your score is not as high as you like, it’s okay. You can make it higher to get the best rates, loans, and more.
“Fix my credit!” If you’re in need of credit repair, we’ve got you covered. Read on to learn what it takes to repair your credit.
1. Check Your Credit Report
If you want to improve your score, the first thing you need to do is check your credit report. Your credit report could have mistakes, so it’s important to check. A study found that 1 in 5 credit reports had errors.
This is why it’s extremely important to do your free annual credit report check on the government site—AnnualCreditReport.com. You should look for errors such as:
- Wrong personal information like address, name, and birth date
- Accounts you don’t recognize
- Late payments that you made on time
- All your credit accounts
- Accounts that are more than a decade old appearing on your report
You should also look for accounts that say “closed by grantor.” If you closed this account, this simple error could cost you. This says that the issuing company closed your account, and not you, which is a big negative to your score.
Dispute Any Errors on Your Credit Reports
You should dispute any errors immediately on your credit report. Errors can bring your score down. You should tell the agency in writing why you think there is an error.
Make a Plan to Fix Your Credit
Once you know that your credit report is accurate, it’s time to make a plan to figure out what is bringing your score down. The biggest factors that determine your credit score include:
- Paying your bills on time
- Amount you owe
- Credit history
- New credit
- Types of credit used
Take a look at each of these areas, and make a plan to improve each item whether it’s consolidating debt, setting up automatic payments, or getting a new account to establish credit.
Pay Your Bills on Time
Lenders want to know that you are reliable and will pay your bills. Pass performance gives them a good idea if you will pay them back promptly. This is why it’s vital that you pay all of your billson time each month, including rent, loans, credit cards, and utilities.
You can set reminders or set up auto-pay to make sure you don’t miss a payment. If you are behind on any payments, make sure you pay them as soon as possible. If you keep paying on time, your recent payment history will impact your credit more than the late payments.
Don’t Close Unused Accounts
If you have old credit card accounts you don’t use anymore, never close them. They don’t cost you any money unless they have annual fees. Keeping these accounts open increases your credit utilization ratio, which takes into account how much you can borrow versus how much you have actually borrowed.
Limit Credit Applications
Don’t let store discounts persuade you to open additional cards. Your credit score is affected each time you apply for an account whether you are approved or not. This new account could impact your score for an entire year.
This doesn’t mean you should apply for any new loans. It’s just important to limit the number of inquiries. If you have a soft inquiry (which is for something like a background check), your credit won’t be affected because there is no new account.
Build a Strong Credit History
If you just started your credit history, it’s hard to improve your credit immediately. You could ask a family member to add you as an authorized user on their credit card account for some history.
You can then piggyback on their strong payment history. This person will be responsible for any debt you incur, so it may be hard to find the right match. You may just have to wait it out and let your accounts be.
Good credit history is typically at least five years of good payment history and utilization. If you just opened your first account, it may take a few months to appear on your credit report.
Keep Credit Utilization Down
The credit utilization ratio is how much of your accounts you use. For example, if you have three credit cards with a limit of $5,000 each, you have a total credit limit of $15,000. If you charge $1,500 each month, your credit utilization ratio is 10 percent.
Lenders like to typically see ratios around 30 percent or less. If you have several credit cards, you may want to consider consolidating your debt with a loan. You can then have one payment with bad credit loans monthly payments.
Focus on One Credit Card at a Time
If you have multiple credit cards, work on paying down the one with the highest balance or that is maxed out first. You should focus on one card at a time with any additional money like tax returns. Stop using multiple cards at the same time to help you monitor usage and improve your personal finance.
Get a Credit Card
If you don’t have a credit card, that could actually affect your score negatively. Try getting a card and making small purchases, and be sure you pay off your balance every month. Having a credit card shows creditors that you can have a mix of accounts and use them carefully.
Find out Why You Are Denied
Different reporting agencies may have different scores. If you are denied a loan, the lender has to show you which report they used. You can then see what areas you need to improve from this report.
Answers to How to Fix My Credit
Now that we’ve answered your question on “how to fix my credit,” be sure you follow these steps and pay your bills on time, use your credit wisely, and lower your debts. Over time if you do these things, your score will improve.
Take a look at other helpful articles to help you financially on our site like how to get out of a financial slump.