A consumer’s credit report determines their credit score. As a reflection of your financial health, your credit score is used by banks, insurance companies, landlords, and other agencies to determine your creditworthiness and even the amount of interest charged for a loan. The higher the credit score, the better options available, so cleaning up your credit report is essential. Here are four easy tips anyone can do to clean up their credit score.
1. Examine Your Credit Report for Errors
Your credit reports show how much credit is being used, your payment history, how often you have requested credit recently, and debt collections, among other things. Consumers are entitled to one free credit report from each credit bureau annually, but during certain times they may be available more frequently. You can request your credit reports through Annual Credit Report.
Examining each credit report allows you to look for errors. Perhaps creditors did not report information correctly, someone else’s debt is erroneously on your report, or someone tried to open accounts in your name. Whatever the error, it’s important to file a dispute with each credit bureau.
- Equifax Credit Disputes
- Experian Credit Dispute Center
- TransUnion Disputes
The credit bureaus must investigate your dispute and respond with a report within 30 days.
2. Sign up For Experian Boost
Experian Boost is a free program that gives you credit for making on-time payments for certain types of bills. As you pay bills like utilities or popular streaming services, Experian Boost will monitor these payments, and it may help boost your FICO® Score. Participating in Experian Boost also gives you free access to your Experian credit report and credit alerts.
3. Pay Down Debt
While making your payments on time is critical, it is also important to pay down debt. Your credit utilization ratio is a significant factor in determining your credit score. This number represents the amount of credit you use compared to your credit limits. If you can afford to pay more than the minimum payment, do so. You will pay off the balances faster, pay less interest, and lower your credit utilization ratio. Most experts recommend keeping your ratio below 30%, but the lower the better.
4. Use a Credit Repair Program
There are various credit repair programs that can help consumers repair their credit scores.
Self has a credit-builder account. Applying does not add a hard inquiry to your credit report. There are various loan repayment plans, but unlike a traditional loan, you do not have access to the money upfront. Instead, you make regular payments, and the amount is deposited into a CD. Each month, your on-time payments are reported to each of the three credit bureaus, which will help build your credit score. Plans currently start at $25/month. At the end of the payment plan, you get access to your money.
If you want to use your checking account to build your credit, you can use the Extra debit card. Your card will have a spending limit based on your bank balance, so there is no credit check. The Extra Card covers your purchase each time you use it, and the amount is debited from your account on the next business day. Your transactions are reported to the credit bureaus each month, which can help build your credit without taking on a credit card. Fees are as low as $7/month, and there is no interest.
Being Diligent Pays Off
Raising your credit score may take a little time, but the effort will pay off. You may see slight increases as you pay bills, but total credit repair is a long-term game, so it’s important to be patient and diligent.
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