Even though Americans have an average credit score of 710, not everyone has good credit. If your credit is bad or damaged, often below 670, it may prevent you from obtaining the things you desire, like a new car, a nice apartment, or the house of your dreams.
But as we’ll see below, there are things you can take to improve your credit.
- Review Your Credit Report & Score
Your credit report can show how you’ve utilized credit over the last ten years. Equifax, Experian, and TransUnion all hold one copy of your credit report. It is essential to review the details on all three of these reports because not all creditors report to all three, even though the majority do.
Your credit report determines your credit score. Therefore, it’s necessary to review that. You can check your credit score for free via websites that offer credit scores or some credit card companies. Your score can be checked with just a mild credit inquiry, which has no negative consequences. One month at a time is suggested for checking your score.
- Correct Or Dispute Any Mistakes.
Sadly, mistakes can occasionally be made by credit bureaus. One Federal Trade Commission research found that 25% of respondents had errors on their credit reports, and 5% of those mistakes might have increased the cost of borrowing money.
Knowing your credit report and score is a fantastic starting point, but checking for inaccuracies is also critical. If you find any, disputing them and removing them is a straightforward procedure.
- Always Make Your Payments On Time.
35 percent of your credit score depends on how well you’ve paid your bills. Therefore, you should focus on streamlining your monthly payments to improve your credit. Even though it might seem complicated, autopay is quick and easy to ensure that all of your bills are paid on time.
Pay any payments immediately if they are one-time medical expenses or other bills you can’t set up for autopay. If you can’t, contact the office to arrange a payment schedule. We advise creating a budget and setting up your autopay to go out simultaneously each pay period if you’re concerned about exceeding your limit.
- Keep A Credit Utilization Rate Of Under 30%.
To calculate your credit use ratio, you must compare your credit card balances to the total credit card limit. Lenders use this percentage to assess your financial management skills. Most experts agree that a ratio of less than 30% to more than 0% is favorable.
Consider that you have two credit cards, one of which has a maximum of $2,000 and a balance of $500 on one. Your credit usage percentage would be 12.5%. Divide the total amount of your debt ($500) by the $4000 sum of your credit limits.
- Get Your Other Debts Paid Off.
If you still owe money, paying it off will help you establish a better payment history and lower your credit utilization rate. When making repayment plans for your credit card debt, take the debt avalanche or snowball approach into account. The debt snowball technique prioritizes paying off your smaller bills first, while the debt avalanche method concentrates on paying off your high-interest credit cards first. Choose the approach that works best for your circumstances by comparing the two.
Knowing that your credit score can temporarily decline if you intend to repay loan debt is crucial. However, we assure you that doing this will raise your credit score.