So, your credit score is lower than you want, and you're interested in working for a higher score but have no idea where to get started? Feeling overwhelmed by the enormity of the credit-raising-task itself? Well, have no fear ASAP Credit Repair is here! We're your friendly, neighborhood credit repair service and we want to help you out. In addition to offering full-service credit repair, we also want to make sure that you have the tools to repair your credit (and keep that score up) on your own. So, today we're going to break down credit repair into seven easy steps that you can tackle.
1. Check your credit score and reports.
Your credit report includes information about how you've used credit in the past 10 years. There are three credit bureaus, Equifax, Experian and TransUnion, and you have a different credit report waiting at each, with free report access once a year. Most creditors notify all three, but not all, so it's worth checking the information on all three of these reports, as they can vary from bureau to bureau. Your credit report is used to calculate your credit score, and it's important to check this too. Don't forget to check your credit score too. You can check your score for free through credit scoring websites or some credit card and bank providers. Checking your own score only requires a soft credit inquiry, which won't damage your score.
2. Fix or dispute any errors.
Sometimes credit bureaus make mistakes. "Sometimes" could even be bumped up to "often". The Federal Trade Commission conducted a study that found that 25% of people had an error on their credit report and 5% of those people had errors that made getting a loan more costly. Eek. So, if you find any errors on your report, follow through and dispute them. It could make all the difference if you're seeking a loan.
3. Pay your bills on time, every time.
Payment history makes up a whopping 35% of your credit score. This means that when you pay your bills, it has the greatest effect on your credit score. So, focus on making your monthly payments on time. This might be challenging, so consider the autopay hack. It helps by taking the "remembering" part of paying your bills off your plate. If you have any bills that don't permit autopay, such as medical bills, try to pay them off as soon as you get them or set up a payment plan ASAP.
4. Keep your credit utilization ratio below 30%.
Your credit utilization ratio is measured by comparing your credit card balances to your overall credit card limit. Lenders will use this ratio to determine how well you manage your finances. A ratio of less than 30% and greater than 0% is generally considered good, so set yourself up to stay within this range.
5. Pay down debts.
Outstanding debts will definitely be a factor that keeps you from your credit score goals. If you have any outstanding debts, make sure to prioritize paying them off, thereby improving your payment history and reducing your credit utilization ratio all-in-one. There's a couple of different approaches you can take when paying off your debt: the debt avalanche or snowball methods. The debt avalanche method focuses on repaying your high-interest cards first, while the snowball method focuses on repaying your smallest balances first. Weigh the pros and cons to each, then determine which method works best for you. If you're planning on repaying loan debt, note that you might see a temporary dip in your credit score. Don't worry, according to Experian, this will improve your credit score in the long run. Be patient.
6. Keep old credit cards open.
Don't succumb to the temptation of closing off old credit cards after you've paid them off. Keeping them open establishes a long credit history, which makes up 15% of your score, and is a positive for you. But make sure to check the fine print first. Your issuer might be able to close your card after a certain time of inactivity. This, combined with an possible annual fee, adds up to being worth closing after all.
7. Don't take out credit unless absolutely necessary.
Your creditor runs a hard credit check each time you apply for credit, which can drop your score anywhere from one to five points. It'll also lower your average account age, which also can drop your credit score. So, take the safe route and try to avoid applying for credit unless you really need it.
Bonus: Check your credit score regularly.
Once you've begun taking the steps to fix your credit, it's best to keep regular tabs on your score by checking it once a month. You'll be able to catch any errors and see how your actions are playing a role in improving your score, which will motivate you to keep working at it. Remember that it does take some time to see big improvements to your score. Sometimes it can take a few weeks for creditors to report your payment information and companies to update your score. Essentially, fixing your credit score is a long-term game, but one you're more than capable of winning.
If these steps feel overwhelming, or if you want an extra set of experienced hands working on your behalf, reach out to ASAP Credit Repair. We know the ins and outs of credit repair and we can take the hard work off your plate. You don't have to have bad credit forever, give us a call today!