Your credit report, history and score wield an incredible amount of power over your finances. They can dictate whether you get approved by lenders for mortgages, personal loans or car loans and the specific terms of those financial products, like how much you pay in interest. People with poor scores are considered higher-risk borrowers and can end up paying significantly more than those with great scores, or even not be able to get approved for loans at all. Luckily, fixing your credit is possible and there are many different tools, methods and habits that can help you do it.
The first step to fixing your credit is ensuring the accuracy of your credit reports. You can do this by requesting copies of your reports from each of the three nationwide consumer reporting agencies. Once you’ve reviewed your credit reports, you should make sure to check for inaccuracies and signs of fraud, including old debts that are still outstanding or accounts that have gone into collections.
Another important step is paying your bills on time and keeping your credit utilization ratio low. These are both huge factors in your FICO credit score and one of the best things you can do to improve your credit score. It’s important to set up automatic payments for any debts you have that don’t allow it and to make multiple small payments throughout the month on your credit cards to keep your balances low when your card issuer reports them to the bureaus.
Lastly, it’s essential to dispute any errors you find on your credit reports. Credit reporting agencies must investigate these claims within 30 days, and if they can’t verify the information, it will be removed from your credit report. You can do this yourself or you can work with a company that specializes in credit repair to manage disputes on your behalf.
Credit repair companies typically work by deleting negative information from your credit report, usually errors. They may also help you with other aspects of your credit profile, such as lowering your debt-to-credit ratio or padding out a thin credit file. While these firms can be a good option for some, the Consumer Financial Protection Bureau (CFPB) notes that you can do most of what they do for free on your own.
Having a good credit score is key to getting the most out of your money. It can help you qualify for better mortgages, personal loans and credit cards with lower rates and fees. It can also save you hundreds or thousands in interest charges over the course of your lifetime. Unfortunately, Americans have the highest recorded debt in history, leading to below-average credit scores and making it harder to obtain the things we need or want. The good news is that there are plenty of ways to fix your credit, from paying down debt to disputing errors on your credit report. Here’s how to get started. fix my credit score