A low credit score can lead to several disadvantages when you are looking to make a big purchase like a home or a car. So how can you fix your score to make yourself more appealing to lenders? There are several ways to improve and repair your credit over time, and there is no better time to start than now. Here are some tips from First Community Credit Union:
Check Your Credit Report
The first and most important step of fixing your credit is to check your official credit score. A large part of repairing your credit involves fixing any errors on your report. There are three major credit bureaus that give you one free credit report a year. This means you can review one report every 4 months to ensure you have accurate and up-to-date information.
Correct/Dispute Any Errors
When looking for mistakes on your credit score, be sure to look out for things such as a misspelling of your name, any additional accounts that are not yours, any fraudulent activity, and incorrect inquiries. If you identify an error, report it directly to the bureau that you received the report. You will need to provide some sort of proof of how the activity was incorrect. The bureau is legally obligated to attempt to fix all mistakes within 45 days. Identifying and reporting errors will go a long way to your future credit success.
Focus on Payments
Making payments on time is one of the most important factors of your credit score. If you have any late or past due balances, pay them as soon as possible. Focus on making minimum payments on all your accounts every month to build up your credit score. Late payments can stay on your credit score for years, so it is imperative to pay those as soon as possible. Once you are caught up, you can start planning and budgeting for future payments.
Balance your Credit Utilization Ratio/Increase Credit Limits
Your credit utilization ratio is how much you currently owe divided by your credit limit. For example, if you had two credit cards with a $20,000 credit limit and have a balance of $10,000 on one card, your credit utilization ratio would be 50 percent. Experts recommend this ratio to stay 10 percent and below 30 percent. Once your ratio is above 30 percent, it can negatively impact your credit standing.
Although there is no way to magically improve your credit overnight, with these tips you can take a step in the right direction towards a better credit score. On average, it can take anywhere from 3-6 months for an inaccurate item to be removed from your credit report following a dispute.
By working to improve and keep your credit status strong, you’ll have more opportunities for better loan rates and higher credit limits.
If you are interested in learning more, our team here at First Community Credit Union has the resources to help you get your finances where you want them to be. Contact us today!