Credit scores are math formulas based on a person’s borrowing patterns and history of paying back their debt. They’re used to determine whether a person is a responsible borrower and should be treated as such by lenders. A good credit score is essential for a number of reasons, including being able to save money on loans and credit cards as well as having a shot at getting a job. Having bad credit can also hurt your chances at buying a house or car, as you’ll likely be saddled with higher interest rates than those with a better score. However, the good news is that you can fix your credit and learn how to build a strong credit score by following these steps.
The first step is to download your credit reports from all three major bureaus and review them for errors. According to Lamine Zarrad, founder and CEO of StellarFi, a credit-building company, it’s crucial that you take this step because inaccurate information can damage your score. This could include closed accounts showing up as open or inaccurate balances. Errors like these can be easy to miss, so it’s worth examining your credit report closely.
Your payment history makes up the biggest chunk of your credit score, so the best thing you can do to fix your credit is to make your payments on time. If you’re over 30 days late, contact the creditor and ask them to change your status to “paid” on your credit report as soon as possible. The longer an account is marked delinquent, the more it will damage your credit score. Additionally, your credit utilization rate—or how much of your available credit you’re using—should be low, and experts recommend keeping it below 30%.
Once you’ve spotted any errors on your credit report, the next step is to dispute them with the credit bureaus. You can do this yourself or hire a credit repair service to manage the process on your behalf. If you go this route, be sure to research companies carefully and never work with any firm that promises 100 percent positive results.
Credit repair takes time, but it’s a worthwhile effort in the long run given how many different areas of life are affected by your credit score and report. In addition to saving you money on loans and credit card interest, having a good credit score can help you land a job, get an apartment or even start your own business. It can also prevent you from being overcharged on utility bills and other household expenses, as the most responsible borrowers tend to have lower rates. So take the time to follow these tips and you’ll find that a good credit score is just a few clicks away. how to fix my credit score