Improving your credit score
If you’re thinking of buying a home and are concerned that your credit score? is too low, you can take steps to improve it. First, make sure there are no errors on your credit report—so double check that accounts listed, and your payment history, are accurate. Pay close attention to any late payments, charge-offs?, collections, closed accounts, or tax liens?. Creditors will report these on your credit report? quickly but can at times be slow to report when you’ve satisfied past-due obligations. Making sure these are accurately reflected can boost your credit score. Then, take a look at areas where your credit history is negatively affecting your score. These are the areas to work on. And while every financial situation is unique, here are things you can do to help improve your score.
Fix reporting errors
Before you get into improving your credit score, it’s important to make sure there are no errors on your credit report. Take advantage of annualcreditreport.com to get your free annual credit report from each major credit bureau?—Experian, Equifax, and TransUnion. If you do find errors, contact each agency separately and let them know in writing that the information is inaccurate along with proof of why it’s inaccurate. Then, reach out to the company that misreported the information. For example, if it’s a credit card company reporting a late payment that wasn’t late, get in touch with them in writing about the error and make sure they remove this from the report.
Pay bills on time
One of the biggest contributors to your credit score is on-time payments. If you’ve made late payments or missed payments in the past, these are hard to fix and could cause late fees. Late payments typically start getting reported to credit bureaus when payments are 30 to 90+ days past due. As a way to avoid this, if possible, set up payments so they are automatically deducted from your bank account when they’re due. The best thing you can do going forward is to get payments in on time and know that past credit problems may become less of a problem as time moves on.
Pay down debt
Paying off debt, especially credit card debt, can make a big difference in your credit score. It’ll increase your available credit and help lower your debt-to-income ratio?. There are different ways to go about paying off debt, like paying more than the minimum monthly payment, halting credit card spending, creating a budget, using only cash to make purchases, and paying off your most expensive debt first. These are just some suggestions. Be sure to do your research to find the approach that works best for you.
Pay more than the minimum payment
Halt credit card spending
Create a budget
Use only cash to make purchases
Avoid opening new accounts
If you’re trying to improve your credit score, avoid opening new credit card accounts. This can negatively impact your score for many reasons, including the risk of taking on more debt and lowering your average account age. It also increases the number of inquiries to your credit report, which can affect your score. With that said, don’t close accounts you already have open as they help with factors like average account age and how much available credit you have.