Although it may have taken years for you to have gotten your credit into the shape that it is in now, it can take much less time to get it back to a higher, healthy level that you and you can be proud of. Mere months can change the interest rates that you pay, which will help you have less debt even on the same amount you purchase. The lower the interest rate you get from better credit the less money you will waste.
Dispute Errors on Your Credit Report
Although sometimes this step alone can take a few months simply because of the communication between the credit bureaus and the the account holder you are disputing, this is one of the easiest steps on this list.
All it involves is making sure that you have been keeping a sharp eye on your finances and making sure that the three major credit bureaus have accurately recorded all of your accounts, debts, and payments throughout the years. If you realize that there is an error on your report and you have documentation to support your dispute, then contact Experian, Transunion, and Equifax and submit it to them.
They will contact the party that you are disputing to verify that the information is correct. If you are correct, your credit score will increase as soon as the bearus report it. These reports can be filed online so you do can do it easily at anytime you need to. Disputing online is also easier for you because you will have to dispute it with all three credit bureaus, so that is much easier than trying to calling all of them and repeating the process.
Pay Off Your Debts
If you have debts on any of your trade lines, then be sure to pay those off first. That way, you can start to rebuild your credit baby steps at a time. It is important to note that paying your debt in collections alone may not be the best to pay off first because the damage is done. To be in collections means that you missed the opportunity to pay your bills on time and that it escalated to collections.
High debt can lower your score also. You want to have a good debt to income ratio. Keep your credit card usage below 20% of your credit line limit. This shows that you responsibly use your credit.
Start with the highest ratio first and work to reduce that to 20%. Then repeat the process. A consolidation loan can be helpful because it takes multiple accounts and consolidates them to one account with one interest rate. You may get a better rate with that loan opposed to credit cards. This can actually save you money.
Do Not Add Inquiries
Hard inquiries can stay on your credit reports for two years, yet they only result from times when lending companies, like car and mortgage lenders are trying to decide whether or not they should trust you with a loan. Soft inquiries, such as when you check your own credit score, do not affect your credit score at all.
You have to authorize hard inquiries, though, so if you see that you have hard inquiries on your credit report that you did not authorize, then you have every right and the responsibility to dispute that with the three credit bureaus as well. This is all the more reason to check your credit score and check it often to make sure that no one has made an error on your credit report.
Only allow someone to check your credit if you seriously need it, like for a mortgage or a car. If you are purchasing a car choose one financial institution and let them check your score. If you go to a dealership they can “shotgun” your credit out. This means they will send it to a ton of lenders hoping that someone will approve it. This is good for them and very bad for you.
Pay All of Your Bills On Time
Paying your bills on time is the one piece of advice that everyone is told, but no one thinks much of until it is too late. Thirty five percent of your FICO score comes from your payment and financial history. You may need to adjust your spending habits so that you can pay your bills on time.
Reach out to professionals to help you make a budget that works for you, such as bi-monthly payments that would work with your payment schedule. After itemizing your bills and making payment schedules that you can easily pay, you can start to pay your bills on time. Remember, this is a huge factor of your credit score. This is also long lasting, so be sure to take this seriously.
Do Not Close Positive Accounts
Even if your entire balance is paid and you are in the black with your account, leave the trade line open. You can make small, manageable purchases with it so that it stays open. That way, you can confidently say that you are actively managing an open, available trade line that does nothing but increase your credit score.
Not only that, but keeping positive accounts open is a form of insurance in case any of your other accounts suddenly become negative. You should always offset negative accounts with positive ones, and this is a good way to do that. Even accounts that you rarely use will help lengthen the age of your credit file, which is good.
These five simple steps will improve your credit score if they are done correctly. Even though paying your bills on time is a huge factor, there are many other factors at play that are just as important.