One of the most powerful numbers in personal finance is your credit score.
Your credit score is a number representing your creditworthiness and ability to handle credit responsibly. It is the number used by lenders, businesses, and a host of other agencies when evaluating whether or not to do business with you.
In short, your credit score is important.
But, if you’re one of the millions of Americans who have a poor credit score, you may have fallen victim to predatory money lenders before you knew how everything worked. In these cases, you’ll be wanting to rebuild and reestablish your credit so that you can benefit from all that a good credit score has to offer.
In this case, you are looking to repair your credit, and you may not know-how.
Luckily, we have 5 easy credit repair tips that will help you get back on track. With a little time and concerted effort, you’ll see your credit improve in no time.
5 Simple Credit Repair Tips to Help You Fix Your Finances
1. Review Credit Reports
The first easy thing you can do to start improving your credit is to review your credit reports.
There are three credit bureaus that collect and track information about your credit, and each is required to give you a copy of your credit report yearly for free. These bureaus are TransUnion, Equifax, and Experian.
Simply go to annualcreditreport.com to get your free copies.
While you’ll only receive a free copy of your credit reports once a year from the bureaus, you are welcome to check your credit score at any time through a number of means. You can sign up for a free account with Credit Karma and see your TransUnion and Equifax scores. You can also see the factors going into your credit score and what negatives might be impacting your credit.
There are also certain credit cards that will allow you to see one or more of your credit scores and the factors impacting them.
Whichever method you choose, make sure you regularly review your credit scores and reports to see what factors are negatively impacting you and what you can do to improve. You’ll also want to make sure there are no errors, which will negatively impact your credit.
2. Dispute and Correct Errors
Did you know that around 25% of credit reports contain an error?
If you’re looking for some credit repair tips, checking your credit reports for errors and working to correct them is vital.
Common credit errors include incorrect personal information, wrong account statuses, duplicate accounts, and negative information that has exceeded the number of years it should remain on your report.
If you find errors on your credit reports, there are a number of steps you can take to dispute and correct those errors. You can read an in-depth how-to guide here, but the main steps include:
- Gathering all relevant documents
- Contact the credit bureau showing the error
- Contact the information provider
- Allow 30-40 days for an investigation
There are also some steps you can take if your dispute remains unsolved contained in the how-to guide.
3. Pay Down Debt
We know that paying down debt is easier said than done, and that a good credit score may be needed to access the resources needed to help pay down debt.
However, paying down your balances and keeping them low is one of the simplest credit repair tips you can employ. This is because credit utilization is one of the main factors that impact your credit score.
Credit utilization is the amount of credit you’re using compared to the amount available to you. Most recommend keeping your credit utilization below 30%, and those that tend to borrow as much as they can are considered high-risk and less likely to qualify for more credit.
For example, if you have a $10,000 credit limit on your credit card and are carrying a balance of $3,000, you would be at 30% utilization.
Thus, paying down your balances can help repair credit because you’re no longer maxing out your credit and have some breathing room should you need to use more credit in the future.
Aside from building credit, practicing low credit utilization is good for your all-around financial situation as well.
4. Pay Bills on Time
Another simple way to improve your credit is to pay bills on time.
Payment history is the most important factor used to determine your credit score. Those that have a long history of paying their bills on time are seen as credit-worthy and low-risk borrowers because they have proven they can handle credit responsibly.
We know, things happen and some of them may have been out of your control. However, as you move forward try and ensure that you are paying your bills on time and if you feel as though you won’t be able to, proactively reach out to lenders to negotiate. Often, those that proactively try to work with lenders when they are behind on bills are able to work out a deal that works for both parties.
Plus, you’ll avoid negative marks on your credit.
5. Explore Credit Repair Options
The last of our credit repair tips to explore once you’ve done the simple things above is to consider credit repair options. Of course, there are credit repair companies out there that can help, but there are also things you can do on your own.
One option is to look into credit builder loans. A credit builder loan is solely done to build credit and the funds aren’t used to purchase anything. In this case, you make monthly payments to the lender and at the end of the loan term the lender gives you the balance (they keep interest of course). As long as you make your payments on time, the lender reports those payments to the credit bureaus, thus establishing an on-time payment history.
Another potential option is to become an authorized user on the account of someone with good credit. You don’t even need to be spending or paying on the account, as long as your name is on it and the primary account holder is making on-time payments.
Of course, there is some risk with this option. You must trust that the primary account holder will use the account responsibly and make payments on time, and they must trust that you will pay your share if you use the account.
Moral of the Story
Unfortunately, many of us tank our credit before we even know what credit is or what we’re doing. The good news is that it’s relatively easy to repair your credit given some time and a concrete effort to do so.
We’ve offered 5 credit repair tips that anyone can do on their own. Plus, these things are relatively simple and things we should be doing anyway to ensure our credit reports are accurate and our credit scores remain good.
Now that you know these options, which credit repair tips will you be looking into?