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A credit score is a number that follows you throughout your life. It changes and fluctuates based on your spending habits, debt obligations, and responsibility toward those debt obligations. When you want to make a large purchase that is beyond any cash you have on hand, it is then that you discover how important and essential a good credit score is.
If your credit score has suffered some beatings, there are things you can do to improve it. Everyone makes mistakes, and mistakes are forgivable over time. Take these steps to start improving your credit score immediately.
1. Obtain Your Credit Report
The only way to know exactly what’s going on with your credit is to get a copy of your credit report. Your credit report will show you how many late payments you’ve had in the last 7 years. It will also show any judgments and defaults against you. You may even find something on the report that doesn’t belong to you. If this is the case, you’ll want to get it removed. But first, you have to get a copy of the report.
You are entitled to a credit score check, and it is available to you at no cost once a year. The report will include reporting from the three major credit bureaus. This is important because not all three reports will be exactly alike. What shows up on one, may not show up on another. Because of this, your score will also be slightly different with each bureau.
2. If You Find an Error
It’s not uncommon to find mistakes in your report. If you find an error on your credit report, such as an account that doesn’t belong to you, you can contest that charge. Go to the website of the credit bureau that is reporting the error. There you will find instructions for how to dispute a report.
Usually, you will need to send a letter identifying the account that is incorrect and request to have it removed. The credit bureau will investigate, and if they can verify it was a mistake they will remove it. It’s a little effort for a potentially big change to your score.If your credit score has suffered some beatings, there are things you can do to improve it. Everyone makes mistakes, and mistakes are forgivable over time. Take these steps to start improving your credit score immediately.Click To Tweet
3. Enroll in a credit monitor
Your bank or credit card company likely offers a free credit monitor. If not, you can sign up for a free CreditWise account from Capital One. The benefit of using your existing bank or credit card company is you can check your credit while you’re on the site managing your account.
Enrolling in a credit monitor will help keep you informed on how well you’re managing your credit. It will also show you how your habits are impacting your score and it can predict how your score would change if you changed certain habits. It may sound like a lot of involvement, but it’s well worth the time you put into it.
4. Maintain a Budget
Everyone should have a budget that they maintain. Whether your budget is weekly or monthly depends on how detailed you are as a person. Your budget can be kept in a ledger or on a spreadsheet on your computer. You’ll want to record what income you expect to receive, and then subtract expenses you expect to go out.
This will give you a good idea of how much extra you have for entertainment and dining out so you don’t go over. If you go over, you risk not being able to pay your bills, and if you can’t pay your bills, it’s going to be reported on your credit report.
What you really want to avoid with your bills is being over 30 days late. Every time you’re even a day over 30 days late, you get a red mark on your credit score.
5. Applying for Credit
You want to avoid applying for credit too often. Every time there is an inquiry on your credit report, this could lower your score. If there are numerous inquiries, it will definitely impact your score in a negative way. These are called hard pulls and you have to agree to them before they can happen.
The reason they adversely affect your credit is that if you are desperately seeking credit, then it’s a sign of financial trouble. A company that extends credit wants to extend it to someone who is financially stable.
Hard inquiries stay on your credit for two years, so every time a lender looks at your application, they can see how many times you’ve applied for credit. Be wary of looking like you’re desperate. The impact hard inquiries have on your credit does lessen as they age.
If you haven’t requested a company to extend credit to you, then there should not be inquiries showing up on your report. If there are, you can dispute these just like you can an accounting error.
There is also a soft inquiry. Soft inquiries are usually performed for pre-approvals and these do not impact your credit score.
6. Watch Your Credit Utilization
If you have credit cards and lines of credit, you have a record of credit utilization. Your utilization compares how much you owe to how much credit you have available. If you owe as much as you have available, then you’ll have a high credit utilization rate.
You want to keep your utilization low. This shows you are responsible for paying off the balances on your cards, but it also makes up around 30% of your total credit score. A good utilization rate would be around 25% and below. This will show potential lenders that you’re a responsible consumer.
Managing your credit isn’t difficult. You can use credit card solutions like Zolve that can help you with managing your finances. It just requires that you act like a responsible adult. All debts you’ve incurred are your responsibility and if you signed a note promising to pay those notes in an agreed-upon time frame, then the lender is going to hold you to it. If you struggle with paying your bills on time, use a budget. You should be using one anyway. Not many people can get through life without knowing their spending limits.
It is essential to have excellent credit in today’s credit driven world. Whether you want to buy a new home, a new car, or save money it all boils down to your credit score. Unfortunately, most people learn the hard way when it comes to credit. This book breaks down 13 hacks that help you understand and improve your overall credit health.