But you don’t have to be stuck in that group forever. There are ways to raise your credit score and join a whole new, more financially-stable group that enjoys things such as lower interest rates and cheaper insurance premiums!
Sound like something you want to be a part of? Let’s look at 8 ways you can begin to fix your credit today.
1. Get a Copy of Your Credit Report
Before you can begin fixing your credit score, you need to know what you’re working with. Pulling a copy of your credit report and learning your score will tell you exactly where you stand and what needs improving.
You can get a free copy of your report once a year through the Fair Credit Reporting Act. It includes the reports from all three major credit bureaus. To access it, go to AnnualCreditReport.com and sign up.
But your credit score doesn’t necessarily come with your report. There are several services you can go through to get a free credit score.
2. Take Care of Past Due Accounts
One of the first things you’ll want to tackle is cleaning up any past due accounts on your credit report. Payment history makes up about 35% of your credit score, so getting that in good standing will make a big difference!
Bring all past due accounts current as soon as possible. You can call your creditors to see about setting up a payment plan if you’re having difficulty. Many creditors will be willing to work with someone who’s actively trying to pay off their debt.
Past due remarks stay on your report for seven years, but the older they get, the less impact they will have.
3. Keep Credit Utilization Low
One of the other ways to fix your credit is to keep the balances on all your accounts low. This improves your credit utilization score, which makes up 30% of your credit score.
Credit utilization is the ratio between how much credit you have and how much of that credit you’re using. For example, if you have $10,000 in credit limits and charge $3,000 a month, your credit utilization is 30%.
The lower you can keep your credit utilization, the better! Below 10% is the best range, but at least try to keep it under 30%.
4. Mix It Up
Many people don’t realize it isn’t just about having credit, it’s also about having different kinds of credit.
There are two main types of credit. These include installment accounts (car loans, mortgages, etc.) and revolving accounts (credit cards).
Creditors want to see you have these different types of accounts and, most importantly, want to see you can handle them responsibly.
While it’s not a good idea to take out a loan for the sake of taking out a loan, it will improve your credit to mix up your account types. If you’re in the market for a car, know that car loan will improve your credit score. Just so long as you keep it in good standing.
5. Don’t Close Unused Credit Cards
If you have credit cards with zero balance that you’re not using, it may be tempting to close the accounts – but don’t. Especially if you’re not paying any annual fees.
That’s because once you close them, that credit limit disappears from your credit utilization ratio. That means you’ll be closing the gap between your credit limits and your credit balances, which will have a negative effect on your utilization ratio.
It’s better for your score to keep the unused accounts. And if you do happen to be paying an annual fee, call the credit company and see if they will downgrade the account to one without an annual fee. Many times they are happy to do this to keep you as a customer.
6. Dispute Errors on Your Credit Report
When you look through your credit report, seeing an error might make you panic a bit. But know that you have a right to dispute any mistakes that show up on your report.
This dispute is sometimes called a credit repair. You’ll receive instructions on how to make a dispute when you receive your credit report online. You can also make disputes over the phone or through the mail.
It’s important you go over all three reports from the three different credit bureaus with a fine-tooth comb. There could be different information on one report versus the others, so you want to make sure everything is correct throughout.
7. Improve the Age of Your Credit
Credit scores love a long-time credit history. Unfortunately, you can’t speed up time to increase the age of your credit fast. But you can tip those odds in your favor with the help of a friend.
Ask a family member or friend if you can become an authorized user on one of their accounts. If they have a long history on that credit card, you can piggyback off of that to improve your credit age.
If that’s not an option, open a credit card to use sparingly. When you do use it, pay it off in full. It will take time to build up the age of the account, but you’ve got to start somewhere.
8. Consider Opening a Secured Credit Card
If you have a bad credit history, it may be worth considering opening a new secured credit card. Especially if you’ve been unsuccessful getting one the traditional way.
These cards are different from others because it requires you to put down a deposit that usually serves as your credit limit. But, it will be easier for you to get one of these cards because the deposit will make you less of a risk in the creditor’s eyes.
With on-time payments and low utilization, some people can see an improvement to their credit score in as little as six months. Even if it takes longer, you’ll be well on your way to a bigger and better credit score.
Improve Your Score with These Awesome Ways to Fix Your Credit
Dealing with credit can be overwhelming. But by using these ways to fix your credit and taking it a step at a time, you will reap the financial rewards from all your hard work in no time.
Want to know what the best credit cards of 2019 are? Check out the list here! Here are some other articles you might find helpful:
Complete guide to getting a credit card no matter what your credit score is
How do personal loans affect your credit score?
WalletHub review – is it a trustworthy credit checker?
Credit Karma review – is it a good free credit checker?