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5 Easy Steps to Fixing Your Credit Score

A credit score can determine whether you become a homeowner or continue to pay money to a landlord for property you'll never own. It can be the difference between purchasing a new vehicle and continue to ride the bus. A credit score has the power to shape the very quality of our lives. 

Good credit generally means access to fair financing. Bad credit can mean denial for loans—or, even worse, exposure to predatory lenders. It is in everyone's interest to see their credit score rise.

Here are five ways that you can begin to fix your credit score. Follow these tips and you may unlock the perks that come from having good credit.

Step 1: Learn your credit score by getting a credit report

You can't fix anything without first evaluating the problem. Obtaining a copy of your credit report is the first step in boosting your credit score.

Getting a credit report is free. All you have to do is register with one (or more) of the three primary U.S. credit bureaus:

  1. TransUnion
  2. Equifax 
  3. Experian

These bureaus will provide an annual credit report at no cost. However, they generally do not provide your credit score. To learn the score that creditors will see when they review your applications, consider [credit score service]. 

The service's [feature name] feature allows you to view all of your credit reports and 28 FICO scores. These scores are critical for banks and other lenders when they determine whether to approve or deny you for credit.

Step 2: Report and fix errors in your report

You may notice one or more errors once you obtain your credit reports and scores. These errors could be due to identity theft, clerical errors, or other fixable problems. 

You can call the credit bureau to report and dispute errors in your credit file. Depending on your circumstances, you can hire professionals to repair your credit, secure your identity, or take other steps to improve your overall credit.

Because of laws, you may see your score improve in a month or less. This means that you may become a strong candidate in the eyes of creditors. 

Step 3: Pay on time continue to build credit

Once you've done the tough part—looking at your score and resolving errors—it is time to establish good credit habits. This means:

  1. continuing to build your credit file responsibly
  2. paying creditors on time
  3. combining credit cards with installment accounts (like car loans) to improve your credit mix

This is a roadmap for getting back into the territory of good credit.

Step 4: Balance your debt and income

Creditors look approvingly on those with a low debt-to-income ratio. This generally means spending less than 30% of your line of credit. Maintaining a favorable credit utilization—30% or less—will get your credit score moving in the right direction.

Step 5: Keep old accounts open

Creditors like to see that you have maintained credit over a long period of time. Do not close old credit accounts, even if you rarely or never use them. By keeping them open, you ensure that your current credit history spans the longest possible period of time. The older your credit age, the better your score.

Follow the above steps to see your credit score ascend and your financial prospects improve.

Posted By : Joshua L.
On : 2.25.21
Finance