If you find that your credit is not where you want it to be, and you’re planning to make your next high-end purchase, like a new car or taking out a mortgage, there are several simple ways that you can start repairing your credit, starting with your next billing cycle. Your credit score is crucial to getting the financial future that you want, so here are three easy ways that you can start raising your credit score:
Reduce All of Your Personal Debts
FICO analyzes five major aspects about you when they decide on your credit score, and the factor that they consider more than any other is your financial history. This encapsulates every minute detail from paying daily debts, to paying credit card debts on time, to whether or not you have ever filed for bankruptcy or foreclosed on your home. After seven years, you can get a do over, but sometimes your outstanding debts can stay long after the seven years have passed. In order to prevent that from ever happening to you, you should work to pay off your debts in full at the end of every billing cycle.
It is all too common for life to get in the way of being able to pay your bills, so if you ever find yourself in that position, then you can take out a small personal loan to pay off your debts at the end of every cycle. Owing to a lender is better than owing to a credit card company because of the typically lower interest rates, and therefore generally lower the amount of time you need to pay off the debt. Plus, the three major credit bureaus like to also analyze the diversity of your trade lines, so the more types of credit and debts that you have and are able to pay off, the more you prove that you can manage more than one type of trade line at the same time.
Dispute Your Credit Score
Because FICO has to do this for everyone with a line of credit in the United States of America, there are bound to be a few clerical errors here and there. Taking up a dispute about your credit history and your credit score is not as uncommon as you might have thought it was, and the process is also really straightforward. This only applies to errors that you can prove with receipts or any other certified proof of purchase.
If you notice an error on your score report, you must contact the three major credit bureaus individually to notify them of the error. Then, you will send each of them the proof that the error has been made. From there, they will verify the truth with your financial institution, and the fallacy of data will be absolved from your record, with no penalty to you, within a matter of weeks. The reason it can take so much time is because it has to get through several systems before reaching you. Much of this process can be done online, so it helps to keep digital copies of all of your financial documents, as well as hard paper copies, to keep things balanced.
This is all the more reason to check your credit score and to check it often. For some reason, there is a stigma surrounding the idea of checking your credit score when there really should not be. Checking your credit score does not lower it, because that is considered a soft inquiry. Only hard inquiries, made by lenders and other financial institutions, negatively impact your credit score, so there is no reason for you to go years without checking your score only to find a crucial error that, when resolved, can be the difference between you taking out a mortgage on your dream home, or having to forego that mortgage in favor of a less valuable apartment lease.
Pay All of Your Bills On Time
Paying all of your bills on time serves more than one purpose in this credit building scenario. First, it enables you to not have to worry about the amount of debt that you did not pay last time rolling over on to the next, saves you from late fees, and prevents you from having to do any rather unsavory math regarding interest rates and principals. This is especially helpful for bills that come from different lenders or institutions because of different dates and deadlines.
The second, and more important, effect that paying off all of your bills at the end of every billing cycle has is the fact that it helps make that all-important important credit and financial history aspect of your credit score report shine. If a lender knows that you pay all of your bills on time, then they can reasonably assume that you will pay off part of your new debt on time as well. They’ll be much more likely to agree to lending to you, with the terms that you want.
Again, if you find yourself in a financial situation that prevents you from paying off all of your bills, you have some options. One option is to take out a debt consolidation loan, which combines all of your debts through a lender and allows you to pay them off through the single lender without having to worry about each individual creditor.
Another option is to break down your bills into smaller payments. You do not even have to break down all of your bills, but if you have a high mortgage payment that you struggle to pay sometimes, talk to your lender and see if you can break down the cost so that you pay half of it after the first half of the billing cycle and the second half after the second. You do not alter the mortgage itself, just the payment plan for the mortgage.
Over time, these three strategies will help you add points to your credit score and bring you much closer to the score that you want. These solid financial habits will put you on a path for success that only comes with having a solid line of credit. Lenders will know that they can trust you with their money, and know that they will get it back, so you will have an easier time taking out loans. Plus, you won’t have to live with the stress that comes with having a low credit score, and that will be an amazing relief for you and your family.