Spring Clean Your Credit Report
Spring always inspires us to clean up our wardrobes and
homes. Something about the season makes us want to start fresh and get the year
off to a good start. While you can’t start fresh with your credit report,
spring is a great time to clean it up and move into the rest of the year with
your best foot forward. Once your credit has gone bad, it can be hard to
improve, but with the simple steps in this article, you can start increasing
your credit score today.
Knowledge is Power
There’s not a whole lot you can do to improve your credit
score if you don’t know what your starting point is. Your efforts to fix bad
credit could be fruitless if there’s something that you don’t know about
weighing your credit report down. Once you know your credit score and have
spent time combing through your credit report, you can move forward with next
steps.
Know Your Credit Score
Your credit score is a numerical value assigned to the
creditworthiness of a person based on their past use of credit. Lenders,
landlords, and employers all use a person’s credit score to determine if and
how they will work with a person. A credit score over 700 is considered good,
while any score below 649 is considered poor or very poor. Most credit scores
fall between 600 and 750.
Though your credit score varies slightly depending on what
kind of lender is looking into it, there are four main ways you can get a good
idea of what your score is.
·
Check
your credit card or loan statement. Many
loan providers and credit card companies have begun providing a consumer’s
credit score on a monthly basis as part of the billing process. In most cases,
you can find your credit score on your monthly statement or in your online profile.
·
Talk to a
non-profit counselor. You can find a list of approved non-profit credit
counselors online. These professionals can get you a free credit report and
help walk you through it.
·
Use a
credit score service. There are online sites that offer free credit score
reporting. However, this is usually too good to be true. While your credit
score may be free to receive up front, you may be signing up for a monthly
reporting subscription that costs money or for a free trial of a service that
will charge after 30 days. Do your research and make sure you know what you’re
signing up for before committing to anything.
·
Buy your
credit score. You can purchase your credit score outright from any of the
three major credit reporting companies. They will not require you to make any
additional purchases or subscribe to a monthly service.
Correct Any Errors on
Your Credit Report
Once you know your credit score, you’ll want to dive into
your credit report to understand why your score is what it is. According to the
Federal Trade Commission, you are entitled to one free copy of your credit
report every twelve months. To obtain that report, you can order online at
annualcreditreport.com or call 1-877-322-8228.
When you dig into your credit report, make sure everything
in the report matches up with actions you know you’ve taken. If there are any
errors, you can call reporting companies to have them corrected. If you see
outstanding debts that you know you’ve paid in full, call the collection agency
that holds the debt and have them remove it from your report.
Pay Off Outstanding
Debts
After you’ve thoroughly combed through your credit report,
you’ll know which outstanding debts you still need to pay off. The best course
of action to get them removed from your report and to start increasing your
credit score is to pay off those debts quickly and all at once. Communicating
with collection agencies is imperative to ensuring that you’re both on the same
page on the exact amount of the debt and that the debt will be paid and removed
from your report.
Pay Your Bills on
Time
Getting into a rhythm of paying your bills on time or before
the due date will lay a good foundation for improving your credit score and
cleaning up your credit report. Many companies offer email and text reminders,
as well as auto-pay options to take the stress out of paying on time.
Consolidate Your
Credit Cards
Having a small outstanding balance on many credit cards will
hurt your credit score more than having a large outstanding balance on one or
two credit cards. If you have small debts spread out across a number of cards,
consolidate them onto one and begin making regular payments that exceed the
payment minimum. Over time, this will greatly improve your credit score.
Open a Secured Credit
Card
If you already have bad credit, it will be difficult for you
to open a traditional credit card. However, there is a credit card option for
you that will help rebuild your credit score, as long as you use it
responsibly. A secured credit card is a
type of credit card that allows you to deposit an amount of money in a debit
account that secures the line of credit the bank is extending to you. The bank
may extend only the amount you deposit, or they may extend more, depending on
which bank and how bad your credit score is.
Though this seems like it functions as a debit card, credit reporting
companies will see it as you using credit responsibly and building a positive
credit history.
Understand Your
Credit Utilization Ratio
Your credit card statement balances are reported to credit
bureaus most of the time, not necessarily your payment history. What this means
is that these credit bureaus only see your outstanding debt compared to your
credit limits. If this ratio is above 30%, your credit score can still suffer
even if you are paying your balances in full every month before the due date.
It always helps to pay more than the minimum payment requirement to keep your
credit utilization ratio in check.
Maintain Awareness
Once your credit score is on its way up, you’ll want to keep an eye on your credit report to make sure nothing negative affects it. However, this is a balancing act. Checking on your credit obsessively could hurt it in the long run. Checking your free report once a year and maintaining positive credit habits will ensure that your credit continues to improve.
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