6 Ways to Repair Credit

Sometimes life just happens and credit scores just take a nosedive. That can be disastrous when you go to buy a house or a car and your credit is full of negative factors that have killed your credit score. But never fear, here are six tried and true ways that you can start fixing your credit today.

Reduce Your Debt

Paying off debts is a good way to start building up your credibility with financial institutions again. Though it may not immediately improve your credit score, once you start paying off your debts and proving to financial companies that you are fiscally trustworthy again, then you will start to see lower rates for your accounts. In order to help make paying off debt easier, try reframing your personal budget, so that you can pay your debts and still have enough money left to survive and splurge from time to time. If you don’t have a little wiggle room in your budget for unexpected expenses, you risk exceeding your budget when something happens.

Debt reduction is also a good way to reduce your interest rates and therefore make paying your debts a lot easier. Again, while this does not immediately impact your credit score, this step combined with the other five steps on this list will help make your credit the best that it can be. This will also make it easier for you to open new trade lines.

Offset Your Negative Accounts with Positive Accounts

When you open new lines of credit to offset the past, this helps cancel out some of the mistakes and dips in your credit that may have occurred in your past. Just like paying your debts off in a timely manner, when you open new trade lines and new accounts, you add more good to the bad story. It’s like a way of balancing the scale. Doing this will slowly, but surely work to repair some of the damages you made in the past.

Pay Your Bills On Time

Piggy bank, credit card and calculator. Isolated over white

This is one of the things that they tell you in high school personal finance classes and its seems like obvious advice.

One of the biggest rules in getting and maintaining a healthy credit score is being sure to pay your bills and also pay them on time. If you cannot pay your bills on time because they are too high, it is a good idea to talk to your financial institutions ask for a grace period or see what other options are available. Many lenders have programs that can help you or will allow you extra time. Your options may surprise you.

Because credit scores are almost like measures of trust between the credit bureau and you, the more actions you take to build that trust, the more they will increase that measurement between you.

Through this step, you can also work to pay off some of your debt. As you pay your bills on time, your new accounts will have lower interests rates, which will further your ability to pay your bills on time. This allows for you to more easily pay off your debts in the future so that you can avoid ever having to resuscitate your credit ever again, and everyone likes the idea of that!

Don’t Close All of Your Credit Accounts Even if You Are Not Using Them

Even if all of your accounts are never used, it will hurt your credit score even more to close them than to keep them open.These accounts keep your credit limits higher and will help when the lenders see how much of your credit you use.

These accounts also help establish a longer credit history. The older your credit history is the better.

Check Your Credit Report and Don’t Be Afraid to Dispute It

Despite the fear and stigma that arises when you go to check your credit report, it is a necessary task, especially when trying to raise a low credit score. If you feel like your credit score does not reflect your financial history, then you also have the right to talk to the credit bureau and argue your case for them to reevaluate your score.

Errors on your report, even small, can impact your score. If it was mistakenly reported that you missed or were late on a payment, this will give you a negative hit to your credit. Incorrect balances can also hurt your score because can affect the ratio of your debt.

Disputing your credit report is simple. You will need to contact the three credit bureaus, typically online, and individually dispute each error. The bureaus may want some proof that it isn’t accurate. After you submit it, the bureaus will contact the account holder and ask them to verify the information that was reported. If it was a mistake, they will remove it. This can be a quick way to improve your score because it takes just a few weeks to be resolved.

Use a Loan to Consolidate Your Accounts

A loan is just one simple way that you can consolidate some of your negative accounts together. This step can also help simplify some of the debt payments that were mentioned in the first tip. Whereas with multiple accounts you have to worry about multiple interest rates and multiple institutions. A consolidation loan will give you one interest rate and also only one late fee, whereas many accounts will have many late fees.  If you happen to be late on a payment, one fee is better than several.

These six tips may not improve your score overnight, but they will definitely be six steps in the right direction that will help you achieve whatever financial goal you have next set out for yourself. Not only that, but everyone deserves to have a solid credit score that they can fall back on no matter what their financial situation is.