Your credit score is more than just a number, it’s a report card of sorts. It tells lenders how well you manage your finances. The better your credit score is, the more likely you are to get approved for loans, credit cards or other types of credit and the less you’ll pay in interest. It doesn’t take much to damage your credit. But building your score back up takes time. If your credit’s less than stellar, here are five tips to repair your credit.
1. Pay Your Bills on Time
One of the easiest things you can do to start repairing your credit score is to simply pay your bills on time. Your score is calculated based on a number of factors. Your payment history accounts for the biggest chunk. Even one late or missed payment could cause your credit score to take a nosedive. So it’s vital that you pay your bills on time or even a little bit early whenever possible.
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If keeping up with your bills is a struggle, check to see if your bank offers free automatic bill payment so you can set it and forget it. If you have bills that can’t be paid electronically or you’re not comfortable with automatic payments, ask if your bank offers a payment reminder service so you’ll know when something’s due. Even doing something as simple as writing down all your due dates on a calendar can help you stay organized and pay your bills on time.
2. Check Your Credit Report
Checking your credit report regularly can help you spot errors and potentially prevent identity theft. You can get a free copy of your credit report from each of the three major credit reporting bureaus annually. Once you get your report, you’ll want to go over it carefully to look for inaccurate information. If you find something that you believe to be incorrect, you can initiate a dispute with the agency that reported the information.
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You’ll need to send a written request that includes your name, contact information, account number and the information you’re disputing. The credit bureau will contact the information provider, which then has 30 days to investigate your claim. If it’s determined that the information is inaccurate, it must be deleted or corrected on your report. You can also ask the credit bureau to send a correction notice to anyone who’s received a copy of your report in the last six months. This can repair some of the damage done by the inaccuracy.
3. Get Rid of Debt
Carrying around a significant amount of debt can drag your score down, especially if your balances are at or close to your overall credit limit. Paying down some of your debt improves your debt-to-credit ratio, which reflects how much of your available credit you’re actually using. If you’ve maxed out several credit cards, lenders might view you as more of a risk when you’re applying for new credit.
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Ideally, you should aim for a credit utilization of around 10 to 30 percent. If you’ve got multiple types of debt, like credit cards, car loans, student loans or a mortgage, start by getting rid of the ones that are charging you the most interest first. Typically, credit card debt is more expensive than other types of debt. It’s a smart move to pay down these balances as quickly as possible to repair your credit score.
4. Pay for a Deletion
When a debt goes unpaid for a long period of time, it’s typically sent to collections. Once it’s reported as a collection account, your score will take a hit and the negative information will stay on your credit report for seven years. If you’ve got some old collection accounts hanging around, you might be able to get them off your report a little early by paying up. Just make sure you get the collection agency to agree to the deletion in writing before you hand over the cash.
If you’ve only had one or two late payments, you could call up your creditor and ask if they’ll cut you some slack and delete the negative information. It’s best to ask for the removal as soon as possible after the information is reported to try and minimize the impact on your credit.
5. Consider a Secured Card
If your credit’s been trashed because of bankruptcy, it may take you a little longer to get repair. One option for speeding up the process is to sign up for a secured credit card. Secured cards typically require you to put up a cash deposit, which also serves as your line of credit. Secured cards tend to allow smaller credit limits and you’re essentially borrowing against yourself so you can’t rack up a lot of debt.
If you’re in the market for a secured card, be sure to look for one that reports to all three of the credit reporting bureaus. It’s also a good idea to pay attention to the fees, since some card issuers can charge big bucks for this type of credit. If you’re keeping your balance low and paying your bill on time, you may be able to convert your secured card to an unsecured card down the road.
There’s no such thing as a quick fix when it comes to repairing your credit and you should be careful to avoid credit repair scams. Fraudulent credit repair companies promise results that are too good to be true and you could end up hurting your score even more in the process. Being proactive and giving it time are the best things you can do to see results when it comes to repairing your credit.
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