We all want our credit score to be top-notch all the time. However, that requires us to be proactive, especially if we’re looking to buy a home or take out a loan in the near future. Our credit score can be either our best friend or worst enemy.
Your credit score could be anywhere within the “Poor” to “Excellent” range. If your credit score is below “Good,” (the lower limit is 670), you will likely struggle to get a loan, rent an apartment, or will be presented with horrible interest rates. On the other hand, if your credit score is “Very Good” (740-799), or “Excellent” (800-850), you probably won’t experience any struggles of that kind.
Luckily, there are many things you can do yourself to improve your credit score, and here are the five simplest steps to do that:
1) Examine Your Credit Report
First, take an in-depth look at your credit report. It will give you an overview of your current situation and show where to focus your efforts to improve your score.
There are three credit reporting agencies – Equifax, Experian, and TransUnion – and each may have different information on file about you. You can request your report from each, either by going to AnnualCreditReport.com or calling 1-877-322-8228 (toll-free). You get one free credit report per year, if you have been denied credit, or are unemployed.
Review all three reports in detail, and be on the lookout for errors and irregularities, as they are far from rare: Nearly one-third of all Americans have had to deal with them at least once.
If you do find any, make sure to dispute erroneous entries immediately. This can be done online, or by emailing the credit bureau or the company that provided the incorrect information. You’ll want to include information about the wrong entry, but also proof that it is incorrect. Once they receive this, both parties will need to investigate.
2) Improve Your Payment History
Payment history is one of the most important factors in your credit score, as it accounts for 35% of it. This includes how often you’ve missed payments, as well as how late they were. This type of information remains on your credit report for up to 10 years, even if you’ve settled the debt in the meantime.
As you might have guessed, the best way to improve your payment history is by paying your bills on time, every time. You should also try to pay more than the minimum due each month. This will help reduce the interest you accrue and shave years off of your repayment timeline. Lastly, if your choice of banking services offers auto-pay, use it – it is probably the safest way to ensure your bills will be paid on time each month.
3) Double-Check Your Credit Utilization Ratio
Your credit utilization ratio shows the proportion between how much credit you have available and how much of it you actually use. The higher the percentage, the worse your credit score is – you should keep it below 30%.
There are a few ways to reduce your credit utilization ratio. One is to ask for a credit limit increase from your lender. Of course, for this to be possible, you already need to be an excellent user. Another way to go is spending less with any credit cards you don’t have to use. This is easier said than done, but if your spending balance on a card is $0 for a few months, the utilization ratio will go pretty far down.
4) Review Your Credit History
Your credit history is another important factor in calculating your credit score. This includes the length of your credit history, as well as how often you’ve applied for new credit. A long credit history is a good sign for lenders.
One way to improve your credit history is by keeping a good mix of old and new accounts open, but only applying for credit when you actually need it. Too many hard inquiries can significantly downsize your score.
5) Hire Someone To Do It For You
If you have neglected your credit score for too long, then you might have more erroneous entries in it than you can successfully deal with alone. For example, if you have the same name as someone else – and you likely do – your reports might get switched, and it can take ages to sort that out. Of course, there’s also the worst-case scenario of being a victim of identity theft. First, you need to report your identity being stolen to the authorities. Then, hiring a good credit repair agency to deal with the fallout might be a good option.
These agencies have extensive knowledge in this field, and will handle the whole process for you. If you don’t mind paying a bit extra for this service, this will certainly save you a lot of time and nerves.
How Long Does Credit Repair Take?
One thing to keep in mind is that repairing your credit score takes time. It won’t happen overnight, but with patience and dedication, you will definitely see improvements. Typically, if you focus on the steps we’ve outlined above, you should start to see results within six to 12 months.
Here are some additional quick tips on how to repair your credit:
- Stay organized – make a plan and stick to it.
- Keep constant track of your credit utilization ratio.
- Keep old accounts open and active.
- Don’t apply for too much credit at once.
- Dispute any errors on your credit report immediately.
- Review your credit score regularly or hire someone to monitor your credit score.
- Keep track of all your payments and credits.
All in All
It can take 30 days or more to get a response from a credit bureau after you dispute an error on your report. Getting inaccurate entries off your record can take even longer, so patience is of extreme importance here.
Still, if you are diligent about following these steps, you can improve your credit score in as little as six to twelve months. Remember to stay patient and organized, and continue using credit responsibly. Good luck!