How to Fix Your Credit Score: 12 Actionable Steps to Raise Your Credit Score
Many people don’t think about their credit score until they need it for something – a loan, a house, a car, and others. But it’s a good idea to know your credit score early so you won’t be surprised when you get rejected for a purchase. A low credit score will bar you from making certain large purchases, but it doesn’t have to stay that way. There are ways to repair your credit and raise your credit score. Here’s how to fix your credit right now so you can raise your credit score.
How to Raise Your Credit Score
1. Review Your Credit Report
The first thing you should do is get copies of all your credit reports and review them very carefully. The three main credit bureaus are Equifax, TransUnion, and Experian, and they are required by law to provide you with a copy of your report at no charge once per year. They don’t mail it to you automatically, though – you have to ask for it. You could also go through a free service such as Credit Karma. All three of your credit reports should be mostly similar, but there may be a few differences between them. Don’t assume they’re the same. Obtain all three and review them carefully.
2. Dispute Negative Marks
Your first task after taking stock of what’s on your credit reports is to try to correct information. Any negative remark that you know to be inaccurate needs to be corrected right away. You can either do it online through a service like Credit Karma or you can contact the credit bureaus directly. If an error is on all three reports, remember to contact all three bureaus. You should start with collection accounts and judgments, as those are the ones that will hurt your credit the most. Once you report the error, the bureau will investigate it with the creditor and either report back to you or remove the error.
3. Dispute Late Payments
You should also report inaccurate late payments so they can be removed. Many lenders will look at your payment history, so these entries can harm you. Report them to each bureau the same way you did the negative marks.
4. Dispute Accurate Information
This one is optional, but it can help raise your credit score if successful. You can try to get accurate information removed, such as a payment that was indeed late. The bureau will ask the creditor to verify and if they fail to do so, the remark will be removed. Some creditors will let it go, but some won’t. The ones that are likely to respond are banks, credit card companies, auto finance companies, and mortgage lenders. Smaller collection agencies, local lenders, and small service providers are more likely to just let it go. It’s up to you whether to include this method or not.
5. Ask Creditor Directly to Remove Unwanted Entries
This means asking nicely. If you have had no luck contacting the bureaus, you may want to contact the creditor directly, depending on the circumstances. If you are a longtime customer, they may be willing to intercede with the bureau on your behalf.
6. Increase Credit Limits
Your credit score is closely tied to your credit utilization ratio, which is the relationship between your credit card balance and credit limit, expressed as a percentage. In general, any ratio above 50 percent is harmful to your credit. Increasing your credit limit will decrease the ratio, though not the balance. However, if you feel it will be too tempting to use that extra credit, don’t go there.
7. Open a New Credit Card Account
The credit utilization ratio is affected by both each individual card and your total available credit. While increasing limits on individual cards helps, so does adding a new card that you never use. Go for a card without an annual fee. Again, don’t tempt yourself if you feel it would be too easy to use the new card. It’s not worth the extra debt.
8. Pay Outstanding Balances
This is one of the most important, but also one of the most difficult. You could fix everything else, but if outstanding balances are still just sitting there, it will not look good for you. Pay balances in full if you can, or you can arrange regular payments. In fact, monthly installments will raise your credit score because it shows a solid payment history.
9. Pay High-Interest and Newer Accounts First
High-interest accounts are the ones that threaten to drown you first. Newer accounts should also be paid quickly, since the age of an account can impact your credit as well. Arrange to pay these accounts first.
10. Become an Authorized User on Someone else’s Card
If you have a spouse or family member with a credit card that has no balance and a good payment history, see if they can add you as an authorized user on the card. Their good credit will start to have a positive effect on yours, as those positive marks start showing up.
11. Keep Old Credit Cards Open
Credit history has a large impact in regards to your credit score. Closing old credit cards can drive down your score. Hang on to these cards instead and try not to use them unless you need to.
12. Pay Every Bill On Time
This is one of the most important steps. You don’t want to undo all of the work you’ve done to fix your credit. Make sure every bill that comes in, no matter what it is, gets paid on time.
Improve Your Standing for Loans and Purchases by Improving Your Credit
These steps will help you repair damaged credit. This will help you raise a poor credit score, so you will be in better standing when it’s time to seek a loan for a major purchase. It will also help you maintain good credit, so you don’t have to go through the process of fixing it again.