How to fix your credit

9 steps to improve your credit score

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Your credit score is a three-digit number that packs a big punch. It can impact your life in major ways, from getting approved for a credit card to being able to buy a house, lease your dream apartment or buy a car. Your credit score can make or break these opportunities. If you find yourself having difficulty getting approved for loans or new lines of credit, you may have a low credit score.

A score of 700 or higher is considered a good credit score, while a score below 650 is considered poor. According to Experian’s annual State of Credit report, the average credit score in the U.S. was 675 in 2018, so if you’re looking to raise your score, you’re not alone.

The good news is there are very manageable steps you can take to start the process of improving your credit score today.

1. Check your credit report for errors

You should check your credit score at least once a year to make sure it’s accurate. You are entitled to a free copy of your credit report every year from each of the three major credit reporting bureaus: Equifax, Experian and TransUnion. You can request your free copies from a credit report site.

Check your credit score
to ensure it’s accurate

You can also enroll in a credit monitoring service, which will allow you more frequent access to up-to-date credit reports, plus additional monitoring for added protection. These services are ideal for anyone who is concerned their accounts may have been compromised and are at risk for identity theft.

When you get your copies, you’ll want to thoroughly check the reports for errors. Unfortunately, it’s not uncommon for mistakes to happen, like someone else’s bad credit history being tied to your name in error, which can negatively impact your credit score. Errors on your credit report, like unpaid accounts, judgments, collections, etc., can be detrimental to your credit score.

To dispute an error, you can contact the credit bureaus yourself either over the phone, online or through the mail. If you have evidence proving that your report is inaccurate, such as a receipt for a bill you paid that is marked unpaid on your credit report, your dispute should resolve relatively easily. For more complicated disputes, especially ones that suggest you’ve been the victim of identity theft, consider contacting a credit repair company to help you.

2. Remove negative marks

After you get errors removed from your report, you’ll also want to look for any negative marks that you may be able to get removed, like late payments.

While these marks are accurate, some creditors may be willing to remove them from your credit report if you ask them, provided you have had a good relationship with them in the past or have extenuating circumstances they are sympathetic to. This may not always work, but it doesn’t hurt to ask. Call the account manager directly to discuss this option.

3. Consider working with a credit repair company

A credit repair company can help you fix your credit score via debt negotiation, item disputes and credit monitoring. There are pros and cons to working with a credit repair company, and you’ll want to consider them all before moving forward. Credit repair professionals have experience negotiating with creditors and know all of the opportunities, laws and restrictions impacting your options for credit repair.

Partnering with a professional will save you the time and energy of having to go through the process yourself. Credit repair companies can help you see results in as little as 30–60 days, depending on why you have a bad credit score. On the flip side, credit repair services are not free, and they’re not guaranteed, meaning you could pay for professional credit repair and still be left with a subpar credit score.

Take a Financial Relief Quiz. Get matched with an Authorized Partner.

    4. Deal with past due bills

    Overdue accounts can have a major impact on your credit score. It’s best to address these accounts first and as early as possible when attempting to fix your credit.

    If your debt is older than two years or is already in collections, you should be aware that just paying off these accounts will not improve your credit score significantly until the collections mark falls off your credit report, which generally takes seven years. Your efforts will be best served making active accounts current before tackling debt that’s in collections.

    Collections marks take
    your credit report

    If you’re in over your head, you may want to consider credit counseling, which can help you make sense of your debt. One potential outcome of credit counseling is entering into a debt management program (DMP) to pay down your debts. A DMP has pros and cons and isn’t the right choice for everyone. If you are able to take a DIY approach to improve your credit score, it’s recommended that you try that route first.

    You’ll want to avoid taking out any new debts, including personal loans, auto loans, mortgages or credit cards while you’re working on fixing your credit. Creditors pull your report every time you take out a loan or apply for a credit card. These pulls are considered hard inquiries, which lower your credit score.

    5. Always pay bills on time

    Paying bills on time, even just the minimum amount, is the single most important factor that impacts your credit score. Payment history can account for as much as 35 percent of your credit score, and a single late payment over 30 days can drop your score by as much as 100 points, according to FICO. Not to mention, you risk getting hit with late fees and penalties on your accounts and put your relationship with your lender at risk. Get organized by setting up automatic payments or a calendar reminder for recurring bills so you never make a late payment again.

    6. Pay down your balances

    Once your accounts are current, you’ll want to start paying down your large balances. Use one of the common debt repayment strategies to start paying off credit card debt. Having less debt means you have a higher credit utilization ratio. Your credit utilization ratio is how much credit you’ve taken out compared with how much credit you have available. Pay off high-interest accounts first, and then work to bring high balance accounts below your limit. Your goal should be to bring all balances to less than 30 percent of your available credit. This will give you an optimal credit utilization ratio. Paying down your balances also demonstrates to creditors that you are capable of paying back your debt, which can help you qualify for credit in the future.

    7. Increase your credit limits

    Call your credit card companies to see if you can increase your credit limits to increase your credit utilization ratio. If you do this, it’s important not to use the new credit given to you—you want that ratio of available credit to used credit to be as big as possible.

    Use caution when opening new lines of credit, as this can hurt your credit score. It is best to increase limits on existing, older lines of credit. If you’re trying to build credit, look for a card without annual fees and one you’re pre-approved for to avoid the hard inquiry on your credit report. A hard inquiry occurs when a potential creditor checks your credit score to determine if they will approve you for a new line of credit. Hard inquiries will generally cause your credit score to go down by several points.

    8. Don’t close old accounts

    When you pay off an account, it can be tempting to close it and be done with it once and for all. But that may not be the best decision for your credit. The age of your credit plays a role in your credit score. Keeping your oldest accounts open, active and at the lowest balance possible will have a positive impact on your credit score and be a great indicator to new lenders that you’re a trustworthy borrower.

    Closing a bunch of accounts at once, even for the positive reason of having them all paid off, will do a number on your credit utilization ratio. Your available credit is the amount of money creditors will allow you to borrow. Even if you don’t use the credit, it’s still available to you as long as your account is open. By closing accounts that are paid off, your available credit will take a nose dive and throw your ratio off, which can affect your credit score for the worse.

    9. Build trust by becoming an authorized user

    Being an authorized user
    your credit score

    If you have a spouse or close loved one with a good credit score, consider becoming an authorized user on one of their accounts. As an authorized user, you will receive the benefit of their positive credit history and diligent payments without having to be approved for a line of credit yourself. This can be especially helpful for those trying to build credit and can also be beneficial when you’re trying to repair your credit and improve your score. You’re basically using their good favor to build trust with lenders yourself.

    Becoming an authorized user is an exercise in trust, so be sure you have a conversation with the account holder and set appropriate boundaries about using their account. The good news is, you do not have to actively use the account to be an authorized user or get the positive traction on your credit history. You can be an authorized user in name only and never use the card. Either way, all the responsibility of repayment will remain with the primary account holder, so your credit will not be negatively affected by becoming an authorized user.

    Bottom line: Can I improve my credit score?

    One good thing about your credit report is that it isn’t permanent. Negative items, like judgments, bankruptcies, late payments and collections, fall off after a period of time, usually seven years. Develop good credit habits now, like making on-time bill payments and paying down debt, so your credit can start the recovery process.

    There’s no question having a low credit score can negatively impact your life, but the good news is there are plenty of things you can do to raise it. Your newest credit habits have the biggest impact on your score, so as long as you are working on fixing your credit, you’ll start to see improvements before your negative marks fall off.

    Start by getting a free copy of your credit report from one of the major reporting bureaus, and figure out the main causes for your low score. From there, take action, whether by paying your bills on time, increasing your credit limit, notifying the reporting bureau of mistakes on your credit report or seeking help from a credit repair specialist. You’ll slowly but surely find your credit score climbing, which will help you when you need to make major purchases and apply for credit down the road.

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