Five Steps to Credit Repair: Improving Your Financial Health
Having good credit is an important part of keeping your financial health in check. Credit repair can help improve your credit score and ultimately your financial wellbeing. Here are five actionable steps to take to start your credit repair journey.
Check Your Credit Report
The first step to improving your credit is to review your credit report. You can obtain a free credit report from the three primary credit bureaus, Experian, TransUnion, and Equifax. Reviewing your credit report helps you identify any potential errors that may be hurting your credit score and should be the first step you take when repairing your credit.
Dispute Incorrect Information
If you find any errors on your credit report, you can dispute them by filing an official dispute letter with the bureau. This letter should include any evidence that supports your dispute and the reason why you dispute the inaccuracy. When you file a dispute, the bureau has 30 days to investigate your claim and remove any inaccurate information.
Pay Your Bills on Time
Your payment history is a major factor in determining your credit score. As such, making sure to pay all of your bills on time is key to rebuilding your credit. Set up reminders and automatic payments to make sure you never miss a payment. By consistently paying your bills on time, you will begin to see an improvement in your credit score.
Reduce Your Credit Utilization
Your credit utilization ratio is the amount of credit you’re using versus how much total credit is available to you. A high credit utilization indicates to lenders that you may be living beyond your means. To lower your credit utilization ratio, pay down your debt as much as possible and spread your purchases across multiple cards.
Keep Old, Paid Accounts Open
Closing accounts can hurt your open credit accounts which can negatively impact your credit score. Instead, leaving these accounts open, even after all the debt has been paid off, can help you keep a high credit score. Keeping old, paid accounts open helps to demonstrate responsible financial behavior to lenders and gives your credit utilization ratio a boost.
Overall, repairing your credit can be a daunting process. However, by following key steps such as reviewing your credit report, disputing any inaccuracies, paying bills on time, reducing your credit utilization ratio, and keeping your old, paid accounts open, you can take an active role in restoring your credit and your financial wellbeing.
