Credit Repair tips
A strong credit score is a major factor in determining the type of loan or mortgage a buyer will qualify for. A poor credit score often comes with a high-interest loan or denial of the loan altogether.
If you’re in a place where you are concerned about your credit score, take these three steps to tackle that bad credit and regain control over your finances.
Learn your score to know where you stand
You can’t fix what you don’t understand. The most important step you can take is to actively monitor your credit score. Sign up for a free credit score tracker through popular sights like Credit Karma or Credit Sesame to know what grade the major credit reporting agencies give you. Credit scores are determined by three major reporting agencies: Experian, Equifax, or TransUnion. Check the score that all reporters have given you.
Credit scores range from 300 to 850, but a good score falls in the 700 – 740 range. A strong score may help you qualify for favorable mortgage rates.
Once you learn your score, figure out all the factors that are being used to determine your rating. Review the list of credit cards, outstanding debts, and major purchases. If something seems out of order, write a letter to the credit reporting agency that looks inaccurate and explain why you think they’ve made a mistake. Experts recommend you submit this letter by certified mail and keep a copy for yourself. Be sure to submit as much information as possible that supports your claim, such as bank statements, payment history, etc.
Pay all bills on time, every time
Now that you know your score, it’s important to take care of the details that go into determining your score. One of the biggest determining factors in your credit score is your ability to pay bills on time.
Sign up for auto-payments on any credit cards and utility bills that you pay each month so that you don’t suffer any late payments. Remember, on-time payments are the best way to improve your score.
Pay down your credit card balances and maintain an acceptable usage rate
Another key factor in improving your credit score is to reduce the amount of money you’ve borrowed through credit cards.
If you have outstanding balances, build a plan to pay down these debts consistently each month until they are gone. Often times, you will need to pay more than the minimum payment to reduce your debt in a timely manner.
Credit bureaus analyze your debt load as a percentage. Ideally, you want to be using less than 30% of the credit you’ve been given. For example, if you have a credit card with a $1000 limit, you don’t want to have a balance on it larger than $300. Staying below this usage rate, as it is called, will immediately increase your credit score.
Ideally, you want to pay off your entire credit card debt each month. But if you’re behind on payments, or are using you more than 30% of your credit rate, you may not be able to. Figure out how much you can afford within your budget to pay down your card each month, and avoid using this card until you’ve paid enough to get below the acceptable usage rate.
Following these steps will inevitably help you improve your credit score. It’s important to be patient while going through this process, but the reward at the end is worth it.
For more tips and tricks on repairing your credit, contact us today!