Last Updated April 6, 2023.
Spring is here and for many people that means spring cleaning. Along with getting rid of stuff you don’t use and tackling all those home repairs you’ve been putting off, now is a great time to clean up your credit score. If your credit score is less than perfect, you’re not alone. According to Fox Business, nearly a third of Americans have a credit score lower than 601. People with poor credit often do not qualify for mortgages, loans and credit cards, and if they do, they usually are hit with very high interest rates. If you want to improve your credit score, here are a few easy things you can do to get back on the right financial track.
Dispute credit report errors – You might be surprised to see just how many mistakes can be on your credit report. In fact, according to an FTC study, about five percent of consumers have errors. Request a free copy of a credit report from each of the three credit bureaus, Experian, Equifax, and TransUnion, and scrutinize them. Look for late payments that were never late, debt that has been paid off, possible fraud, credit inquiries you did not authorize, etc. If you see an error, file a dispute with the credit bureau. You can file your dispute online or through the mail. You must substantiate your claim with proof, and be sure to make copies of everything. It can take time to receive a response, but removing discrepancies and correcting your report is essential for your long-term financial health.
Pay down your credit cards – Up to thirty percent of your credit score may be based on your debt-to-credit ratio, that is, how much you owe vs. your total available credit. If you have a significant amount of revolving credit card debt, try to come up with a plan to pay it down. Make extra payments, pay over the minimum every month and most important —don’t use your credit card! If it makes sense, consider a balance transfer to a credit card with a lower interest rate (be sure to take into account any balance transfer fees). Your credit card debt doesn’t have to be zero, but aim for a debt-to-credit ratio of below 30 percent.
Once you pay off a credit card, keep it open but don’t charge anything else. Keeping it open gives you available credit that will help lower your debt-to-credit ratio. It will show that you have credit, but are able to use it responsibly.
Pay bills on time – Approximately 35% of your credit score may be based on your payment history. While timely payment of your current bills won’t remove any delinquent payment history from your credit report, it is important to maintain good payment habits so that you don’t accumulate any other negative marks. If you have trouble remembering to pay your bills, auto-scheduling your payments can be a smart option.
Rebuilding your credit score is not a quick fix. Take these steps, be patient and continue working to establish and maintain good credit going forward.
The information provided in this blog post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.
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