5 Steps to Repair Your Credit and Make it Sparkling Again
Your credit score affects almost every aspect of your financial life from getting a loan to being approved for a job. It’s important to stay on top of how your credit score is doing. If your credit score is less than desirable then it’s not the end of the world. There are a few steps you can take to repair your credit and get it back on track.
Step 1: Understanding Your Credit Report
The first step to repairing your credit is understanding what is in your credit report. You can get a free credit report from each of the three major credit reporting agencies (Experian, TransUnion, and Equifax) once a year. Requesting your credit report will not hurt your score. Once you have your credit report, read it and make note of any incorrect information. Notify the credit bureau immediately if you find an error or something that is outdated.
Step 2: Pay All Of Your Bills On Time
One of the most important things you can do to repair your credit is to pay all of your bills on time. Lenders and creditors look for a consistent pattern of on-time payments when evaluating your credit score. Make sure to set up auto-payments if you need to make sure that your bills are paid on time.
Step 3: Keep Low Balances On Credit Cards
Your credit utilization ratio—how much revolving debt you have compared to your available credit—has the second biggest impact on your credit score. It’s important to keep your debt balances as low as possible while increasing your credit limits. A good rule of thumb is to use no more than 30% of your available credit.
Step 4: Try To Pay Off Past Due Bills
If you’ve got any past due balances, try to pay them off as soon as possible. This will help your credit score recover quickly as the accounts move from “past due” to “paid,” improving your overall credit score. Even paying off smaller past due balances can have a positive impact.
Step 5: Avoid Closing Older Accounts
Another important step to repairing your credit is to avoid closing older accounts. Closing accounts can have a negative impact on your credit score as it removes credit history from your report. While it can be tempting to close accounts to limit your spending, it’s better to keep them open and try to limit your spending instead.
If your credit score is less than desirable, don’t worry, there is hope. By following these 5 steps, you can get your credit score back on track and finally have the credit report you’ve always wanted. Start by understanding your credit report and then take steps to reduce debt, pay bills on time, and avoid closing older accounts. In time, your credit score can improve and you’ll be well on your way to a sparkling credit record again.
