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 can be approved for loans, credit cards or other types of credit. A higher credit score can also mean you get better interest rates. 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. A number of factors determine your score, but 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.
If you struggle to keep up with your bills, check to see if your bank offers free automatic bill payment. That way you can set it and forget it. If you’re not comfortable with that or you have bills that can’t be paid electronically, ask your bank if they offer a payment reminder service. You can even try something as simple as writing down all your due dates on a calendar. That can definitely 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.
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 has 30 days to investigate your claim.
If the information is in fact inaccurate, they must delete or correct the information on your report. You can also ask the credit bureau to send a correction notice to anyone who has 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 a significant amount of debt can drag your score down. This is especially true if your balances are at or close to your overall credit limit. Paying down 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 view you as more of a risk.
Ideally, you should aim for a credit utilization of around 10 to 30 percent. Sometimes you’ll have multiple types of debt, like credit cards, car loans, student loans or a mortgage. In that case, start by getting rid of the loans with the highest interest. 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. Your score will immediately take a hit. Not only that, but that negative information stays on your credit report for seven years.
If you have some old collection accounts hanging around, you might be able to get them off your report a little early by paying up. You can do this with the collection agency itself. Make sure you have an agreement in writing before you hand over any cash.
If you’ve only had one or two late payments, you could call up your creditor and ask for some slack. They could delete the negative information that way without charging you. It’s best to ask for the removal as soon as possible after the information is reported. That can help minimize the impact on your credit.
5. Consider a Secured Card
If bankruptcy trashed your credit, it may take you a little longer to repair it. One option to speed 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 carry smaller credit limits, avoiding the possibility of huge payments.
When looking at secured cards, you’ll want one that reports to all three of the credit reporting bureaus. Pay attention to the card’s fees, since some issuers can charge big bucks for this type of card. Keep your balance low or nonexistent and pay your bills on time. By doing that, 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.
Rebecca Lake has been writing about the nuts and bolts of personal finance for nearly a decade. She is an expert in investing, retirement and home buying topics. Her work has been featured on The Huffington Post, Business Insider, CBS News, U.S. News & World Report and Investopedia. As a homeschooling mom of two, she’s always looking for ways to make the most of every dollar.
Article courtesy SmartAsset.com. © 2020 SmartAsset, all rights reserved.