Potential lenders view your credit score almost as a report card that summarizes how well you’ve handled borrowed money in the past. If your credit isn’t exactly where you’d like it to be, take steps toward improving your credit. Here’s how to fix your credit in 5 easy steps.
As long as you have one or more accounts in a past due status, your credit score and credit report won’t look great to potential lenders. Before you do anything else, get any and all past due bills caught up. If you’re having difficulty making your payments, work on your budget and try to find costs that can be cut, or consider picking up a side hustle to help improve your finances.
Once past due accounts are caught up, the next thing you need to commit to is paying all your bills on time. A good way to stay current is by setting up auto-draft so that payments are drafted immediately when they’re due. If you’re leery of having payments automatically drafted from your bank account, sign up for reminders from your creditors to let you know when due dates are approaching.
One factor that has a big impact on your credit score is your credit utilization. This means the percent of available credit that you’re using on credit cards or any other revolving accounts. Work on paying down your credit card balances to below 30 percent of the credit limit. If you have credit cards you aren’t using, avoid closing the accounts, since doing so reduces the total amount of available credit. You can also improve your credit utilization by requesting a credit line increase or by applying for an additional card that you don’t intend to use, just for the sake of increasing the total amount of available credit.
The age of your accounts has some impact on your credit score. It’s a good idea to avoid applying for too much new credit in a short period of time. There are two reasons for this. When potential lenders run a credit check, it shows as a hard inquiry on your credit report. And, since new accounts reduce the age of your accounts, it’s a good idea to space out applications.
An important part of fixing your credit is to review what’s on your credit report. You may be surprised to find that not all the information on it is accurate, and inaccurate items may be bringing down your score. Things to look for include accounts you don’t recognize, wrong balances, or accounts showing as past due that you paid on time. If you find errors, dispute them with the credit bureau that’s reporting incorrect information.
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