Having a good credit score is beyond essential in this modern day and age. It can help you take out an auto loan, a mortgage on your house, or any other number of loans. A good score is also often essential when applying for new credit cards, when renting an apartment, and sometimes even when looking for new work.
The fact is that a good credit score is a must. But it’s also a fact that it is all too easy for your credit score to drop, quickly, suddenly, unexpectedly. You might even think your score is decent only to apply for more credit and find that you’re turned down.
While plenty of companies say that they can help you fix your low credit score, give it a boost if you will, the truth is that there is almost never a ‘quick fix’ to credit score woes like the ones that many of these companies state they can provide. Improving your credit score takes time. Luckily though, it can be done, and it can be done on your own, without the help of companies (and without parting with all the money needed to pay for this help).
Below are five ways that you can repair your own credit score, over time, and by yourself.
1. Understand Good Credit
It is surprising how many people toss the idea of ‘good credit’ around without understanding exactly what it is. In fact, many people who use the term on an everyday basis have no idea what good credit actually means. Understanding this is essential to repairing a bad credit score.
There are a multitude of different factors that go into your credit score. A new creditor will review these factors so that they can decide how much of a risk you are to them and how likely you will be to pay back the money that they lend you. Most creditors view your FICO (Fair Isaac Corporation) credit score to do this. A 740 is considered optimal by nearly all of them. The lower you go, the more of a risk you’ll be for a creditor or the ‘worse’ your score is. The higher you go, the better. In 2012, the average American’s credit score was 690 according to The Wall Street Journal.
2. Take a Look at Your Credit Report
Before making any assumptions about your credit score, start by taking a look at your credit report. By law you are allowed to receive a one-time free credit report from each of the three major credit bureaus each year. These include Experian, TransUnion, and Equifax. You can easily request these at annualcreditreport.com. Looking at your credit report will show you what exactly your score is and why.
3. Check for Errors
Though they don’t happen frequently, credit reports have been known to have the occasional error. While checking out your report, be sure to keep a keen eye open for anything that looks like a mistake. If you find a mistake, the first thing to do is contact the specific creditor or credit agency that it is associated with on the report. It is essential to put your notification of the error (otherwise known as a challenge) in writing and send it in via certified mail. Keeping detailed records of everything regarding the dispute is essential in figuring it out successfully.
4. Pay Those Bills
The biggest reason for a poor credit score is a backlog of unpaid bills. Simply getting current on your bills can help improve your score by bushels. Though this can obviously be hard, try setting aside any available cash to bring all of your accounts up-to-date. This will eliminate late fees and over-limit fees. You might also be interested in setting up payment alerts via email or your online banking system. This can help if you’re the type who is always forgetting to pay your bills on time.
5. Pay Down Debts
Another huge reason for lackluster credit scores is debt. When you use credit cards for more than 20 percent of your credit limit, your credit report will reflect this in a negative light. Furthermore, other unpaid debts or loans will affect your score in much the same way that unpaid bills do. Get current on your debts if possible by paying them down. If you are really struggling with debt, consider a program like debt consolidation. Though this will help you get out of debt (which will improve your score considerably in the long-run), it can have a negative impact on your short-term credit score.