How to Fix your Credit Score
Published on: April 3, 2023
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Having a good credit score is crucial to achieving financial success. A good credit score opens doors to better interest rates on loans, credit cards, and mortgages. Unfortunately, many people have poor credit scores, which can limit their financial options. However, fixing your credit score with time, effort, and discipline is possible. This article will discuss the steps you can take to improve your credit score. Experian describes a good credit score as 670-739.

Understanding how you get your score

Firstly, understanding how credit scores are calculated is crucial. Several factors, including your payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries, determine credit scores. Payment history and credit utilization are the two most critical factors that affect your credit score. Payment history refers to whether you have made your payments on time, and credit utilization refers to how much credit you use compared to how much credit you have available.

Get a copy of your score

The first step in fixing your credit score is to get a copy of your credit report. You can obtain a free copy of your credit report once a year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Once you have your report, carefully review it to ensure all the information is accurate. If you find any errors or discrepancies, you should dispute them with the credit bureau to have them corrected.

 

Pay your bills on time

Next, you should focus on paying your bills on time. Late payments can have a significant negative impact on your credit score. Pay at least the minimum amount due on your accounts by the due date. If you struggle to keep up with your payments, you should contact creditors to discuss your options. They can work out a payment plan or reduce your interest rate to help you get back on track.

 

Reduce your credit utilization

In addition to paying your bills on time, you should also focus on reducing your credit utilization. Credit utilization refers to the percentage of your available credit that you are using. For example, if you have a credit limit of $10,000 and a balance of $5,000, your credit utilization is 50%. Ideally, you should keep your credit utilization below 30%. You can either pay down your balances or request a credit limit increase to reduce your credit utilization. Be careful not to open new credit accounts, which can negatively impact your credit score.

 

Diversify your credit

Another way to improve your credit score is to diversify your credit. Having diverse credit means having a mix of different types of credit, such as credit cards, loans, and mortgages. If you only have one kind of credit, such as credit cards, applying for a loan or a mortgage may be beneficial. However, you should only apply for new credit when you need it and can afford it.

 

Be cautious about apply for new credit

Finally, you should be cautious about applying for new credit. Each time you apply for credit, it results in a hard inquiry on your credit report, which can negatively impact your credit score. If you are shopping for a loan or a mortgage, try to do it quickly to minimize the impact on your credit score. Also, read the fine print before applying for new credit to avoid surprises.

In conclusion, fixing your credit score takes time, effort, and discipline. By following the steps outlined in this essay, you can improve your credit score and open doors to better financial options. Remember to review your credit report, pay your bills on time, reduce your credit utilization, diversify your credit, and be cautious about applying for new credit. You can achieve a good credit score and financial success with patience and perseverance.