Whether you experienced a job loss or a lengthy illness, you aren’t alone if a financial setback has damaged your credit. You don’t need to be told that you need good credit. What you need are helpful tips to get your credit back on track. It might take some time, but it is possible to repair your credit.
Wishing and hoping, however, won’t improve your credit score. It takes hard work and discipline. It also takes patience. Your credit score won’t improve overnight, but there are some steps you can take that will get your credit back on track in a few months.
Easy as 1-2-3?
All right, it might not be as easy as that. However, these three steps you can take to repair your credit are a smart place to start. Once you understand how your credit score is determined, you can focus on improving the factors that have the biggest impact on it.
1. Know your score
Roughly a third of Americans have credit scores under 601. If that includes you, it’s time to arm yourself with knowledge and make a plan. The first step to repair your credit is to know exactly what’s in your credit report. You are entitled to free copies once a year from the three credit reporting bureaus: Experian, Equifax and TransUnion.
Check all three reports. That’s because your credit reports might not be identical. If you find an error you must correct all three reports. Correcting one of them won’t automatically correct the others.
Because information is for the most part retained for seven years on your credit reports, it’s in your best interest to dispute inaccurate information. Credit bureaus are required to respond to your dispute within 30 days. Take heart. Nearly 80% of those who report errors are able to remove them. So don’t let mistakes linger for seven years!
2. Improve your payment history
Your payment history accounts for about a third of your credit score. You can’t erase late payments, but when you get your payments back on track, you’ll get your credit back on track. United Financial can help you make your payments on time.
Setting up automatic payments with Net Pay Online Bill Pay is a simple process. You don’t need to worry about stamps, getting to the post office, or writing checks. Your payment will arrive on the date you set up. Just make sure that you have sufficient funds in your account to cover your bills.
If you need help with making a budget, our BudgetSmart software gives you the tools you need. It will help you ensure that your income will cover your monthly expenses and indicate where you might need to scale back. Bills may never be fun to pay, but avoiding debt can relieve a lot of stress.
If sticking to a budget doesn’t inspire you, consider this: Paying bills on time also pays you. You not only repair your credit when you pay on time, you avoid late payment fees. That keeps more of your money in your pocket!
3. Improve your utilization
Another third of your credit rating is based on your utilization rate. This is the ratio of debt you have on your credit card compared to your debt limit. You should keep your utilization to 30% or less. Ideally, it should be no more than 10%.
If your limit is $10,000, you need to get your debt down to $3,000 as soon as you are able. To repair your credit, you might need to put the card away so you don’t add any new debt to it and pay more than the minimum required payment.
Another strategy to repair your credit is to open another account. Keep in mind that opening a number of new accounts is a red flag and could work against you. If you do opt for a new credit card, consider a secured card. United Financial can help you with this option.
A secured card means that your credit limit is tied to an amount you have on deposit. The same rules apply to this credit line. You must make payments on time and you must keep your utilization under 30%. If you do that, you can start to rebuild a positive credit history.
Finally, don’t close out old cards in good standing—but don’t use them either! The credit limit and age of your credit card can work in your favor. The longer you have had it, the better. And a card with a zero balance improves your overall utilization.
Back on Track
If you’re thinking, “It sounds doable, but I don’t think I can do this on my own,” come talk to us. United Financial offers free financial education and counseling services. You can also check out financial education videos from Accel, our trusted financial counseling partner.
Talk to us before you hire a credit repair agency! You don’t have to be a financial genius to repair your credit. If you feel overwhelmed or uncertain, we can help you get your credit back on track.
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