Overview of Credit Scores
A credit score is a three-digit number that lenders use to assess the risk of loaning money or extending credit. It helps them to decide whether to lend you money, how much, and what interest rate. It is based on your credit history, which is compiled from your past and present credit accounts, including mortgages, bank loans, credit cards, utility bills, collection accounts, and more. Your score can vary depending on the type of lender and the type of product.
Factors Impacting Your Credit Score
Your credit score can be negatively affected if you:
- Fail to pay credit card bills on time or at all
- Have high levels of debt relative to income
- Have recently gone through bankruptcy or foreclosure
- Have maxed out your credit cards
- Have had an account referred to a collection agency or written off
Steps to Repairing Your Credit Score
If your credit score is in need of repair, there are some steps you can take to help improve it:
1. Review Your Credit Reports
The first step to improving your credit score is to review your credit reports. Make sure all of the information is accurate and up-to-date. If you find any errors, dispute them with the credit bureaus. This can help to improve your credit score.
2. Make Timely Payments
Making timely payments on your accounts is one of the best ways to repair your credit score. Set up automatic payments or make sure you make your payments on time. Missing payments can have a major negative impact on your score.
3. Lower Your Credit Utilization
Having a high credit utilization ratio can significantly decrease your credit score. Lower your ratio by paying down your balances and/or avoiding opening any new accounts.
4. Open New Accounts with Responsibility
Opening a new account can have a positive impact on your credit score. However, it’s important to open these accounts responsibly. Make sure to only use the new accounts for normal spending and keep your spending and payments on time.
5. Check Your Credit Score Regularly
Monitoring your credit score regularly can help you spot any potential problems early on. This can help you take the necessary steps to repair your credit as soon as possible.
Conclusion
Repairing your credit score can be difficult, but it’s possible with patience and discipline. Following the steps outlined above will help you get back on the path to good credit. Be sure to review your credit reports regularly and keep up with your payments so you can continue to build a strong credit score.
