Having good credit makes it easier to qualify for loans and save money on things like mortgage rates, auto insurance premiums and utility bills. But bad credit can hold you back and cost you thousands of dollars in interest charges over time. That’s why it’s important to work on fixing credit as early as possible, especially if you plan to apply for financing in the future.
You can fix your credit yourself, or you can pay a professional to do it for you. However, it’s critical to understand that there are both legitimate and illegitimate credit repair companies out there. It’s also important to know that credit repair is a process, and it can take a year or more before you see results from your efforts. So beware of companies that claim to fix credit quickly, as they are likely scams.
One of the biggest ways you can improve your credit score is to pay down debt and avoid late payments. You can do this by paying down balances on credit cards and reducing your credit utilization, or the percentage of your available credit that you use. You can also check for errors on your credit reports, and it’s important to dispute any inaccurate information that you find.
It’s also a good idea to stay current on your payment accounts, because your payment history makes up 35% of your credit score. And you can do this by setting up automatic payments for your monthly bills and making a point to pay all of your bills on time. If you have a few bill that don’t allow autopay, consider using a service like reminder apps or set up email or SMS alerts to get a notification when a bill is due, and make sure to pay them as soon as you receive your statement.
Another way you can help your credit score is to use a credit card regularly, but only charge small amounts each month and always pay off the full balance. This will improve your credit-utilization ratio, and will also give you a chance to build up an active credit history without incurring any late fees or other negative marks.
You should also avoid closing any open credit card accounts, as this will lower your available credit and increase your revolving utilization rate. Instead, you can make small purchases on your card each month (like a cup of coffee or pizza dinner) and then immediately pay off the balance to keep your revolving utilization low.
While repairing your credit can be challenging, it is well worth the effort in the long run. A good credit score can make it easier to borrow funds and save you hundreds or even thousands of dollars over the course of a year in interest charges. And if you plan on applying for loans or mortgages in the near future, your efforts to fix credit now will pay off down the road. So be diligent, and be patient: Your credit score will eventually improve.