Having a low credit score can hurt you in many ways. You’ll pay a higher interest rate on your loans, or lenders may deny your application for a loan or a new credit card altogether. In some instances, having damaging issues on your credit report can even hurt your prospects for landing the job of your dreams.
But, there are ways that you can repair your credit report and raise your credit score. Here are several things that you can do today, right now, to improve your credit health.
- Attack Your Debt
One of the best things that you can do to improve your credit health is to pay down your debt. Nothing else makes a bigger impact on your credit score than paying off your debt and paying on time.
You should look at creating a debt snowball plan to attack your debt. With a debt snowball, you list all of your debts and then pay each one off, starting with the debt with the smallest balance first. Your debt snowball is of course while you are continuing to make the minimum monthly payments on your other debts. After the first one is paid off, roll that payment into the debt with the next smallest amount and keep going from there.
- Set Up Automatic Payments
It probably seems like a no brainer. But, paying your bills with automatic payments online is a great first step to boosting your credit health.
With automatic payments for your credit cards and other debts, there’s less of a chance that you will miss a payment. Not making payments on time on your loans is one of the most common penalties consumers find on their credit report history, and it is something so simple to fix.
- Get All Three Credit Reports
To stay on top of your credit health, you have to request your credit reports from Equifax, TransUnion, and Experian. The Fair Credit Reporting Act (FCR) allows you to receive a credit report from each credit bureaus for free once each year. So, every four months, you should ask a different bureau to provide you with your free credit report. That way you will receive one from all three bureaus each year. Go to AnnualCreditReport.com to request your annual credit reports for free.
- Dispute Errors on Your Credit Report
Many people don’t check their credit report very often. And, if they do, they only receive their credit report from one of the three credit bureaus. But, errors that you let linger on your report can hurt your credit score. You should report any errors that you find on your credit report to the credit bureaus right away.
There may be an account on your credit report that you didn’t even open. Maybe you have debts from a family member that lenders have erroneously placed on your credit report. These can be a warning sign of identity theft.
It pays to keep a close eye on all three reports. You should request one from each of the three credit bureaus each year at a minimum.
You should also get your myFICO credit score from the Fair Isaac Corporation. Your FICO score is the premier credit score that over 90% of all lenders use to make lending decisions about you. It’s the credit score that matters more than any other and the one that you should track like a hawk.
Now it is easier than ever to report errors since all three credit bureaus, Equifax, TransUnion, and Experian let consumers report errors directly on their websites. The three bureaus often don’t share information with each other and lenders may only send data to one of them. So, you should check for errors with each one separately and dispute any errors you find with each one separately.
- Close Credit Cards
Closing credit card accounts will slightly lower your credit score in the short term. But, canceling credit cards could be well worth the effort to help you get your credit health back on track. It may be a little against the grain or counterintuitive, but closing accounts will help curb your spending. It will help you to focus on paying off your debts and not adding to your existing credit card balances.
- Consolidate Debt Carefully
Consolidating debt only attacks the problem and not the cause. If you’re not careful, you can wind up with even more debt after you consolidate your current high-interest loans and credit cards.
But, consolidating high-interest debt, like those from credit cards, into one easy to manage payment can be a big help fo increase your credit health. Not only will consolidating your debts lower your interest rate and focus your attention on one payment, but it can also save you thousands of dollars in interest payment.
If you have multiple credit cards with annual percentage rates over 16%, consolidating those debts into one new loan under 16% can save you a fortune in future interest payments and help you pay off all of your debt faster.
- Plan for Big Events
Big events like buying a house or car require planning. If you know that you want to purchase a house in next few years, start thinking about your credit score now.
Do you know what your current credit score is? Look to pay down debts and clean up errors to give your credit score a boost before you apply for that big loan in a few years. A little planning now will go a long way in helping you receive a great interest rate from lenders in a few years.
Having a bad credit score isn’t the end of the world. You can recover from it. With diligent effort, you can raise your credit score and fix your credit health.
Some things take time and effort to reflect on your credit report and raise your credit score. But, there are a few things that you can do right now.