Credit can be tricky because a lot of different factors can affect it. Thankfully, there are plenty of things that you can do to fix it with a little self-educating and some self-control. So, if you’re wondering “how can I fix my credit myself,” let’s talk about some of the solutions.
Evaluate Your Credit
The first thing you should do in figuring out how to fix your credit is to evaluate your current credit situation. You should look into getting full credit reports from the three bureaus that provide them: TransUnion, Experian, and Equifax.
To have a good credit score, you need to have a score above 700. Credit scores are between 300 to 850. The better your credit is, the better interest rates that you will likely get for loans, and the better chance you’ll get approved for them.
When you look at your credit report, you should be looking for potential negative information. This could be a late payment, a delinquent account, bankruptcy, or collections. These things can have long term effects on your credit score and will take a long time to repair.
Disputing Incorrect Information
If you think that there is false information on your report, you can dispute it. If you can prove there are errors with statements, you can bring these to the bureaus to make a claim. You should always follow up on these disputes to make sure that they get resolved.
After you bring the dispute to the agency’s attention, they have 30 days to forward the information you gave them to the organization. Once this happens and they confirm the information is incorrect, they will notify the bureaus so that they can correct the errors in your report.
You should also look at all the other information on the report. Take note of the current balances that you owe and what your total available credit is. You should also make sure that the accounts that you have closed in the past are noted as closed, and you aren’t accruing annual fees. Look out for any accounts that are currently open that have late payments on the record.
The report will also be able to tell you all of your credit inquiries. You should review these and make sure you recognize all of them. If you don’t recognize one or more of the inquiries, it might be possible that someone has stolen your identity. This can happen if someone applies for a credit card using your name.
Make On-Time Payments
One of the most important steps for improving your credit on your own is making your payments on time. Don’t let yourself get behind on bills because this will only further damage your credit. You need to prove that you can be consistent with paying bills on time for your score to improve.
You should try to set up automatic bill pay for whatever you can. If you are unable to access this feature for a bill, pay it a few days early so it has time to be processed before it is due.
There are also a few different companies you can look into that offer ways to boost your credit. This usually involves the company reporting your good behavior for every on-time payment to the credit bureau, including non-credit accounts such as utilities and rent to show creditors that you’re able to make important payments on time.
Keep Track Of Your Score
You should come up with a strategy for keeping an eye on your score. This will ensure that you catch any suspicious activity before it gets out of hand. There are a few different companies that offer this type of service. Usually, these companies will not have your exact credit score available to you but it will be in close range to the actual number.
If you are willing to pay for a service to monitor your credit, they can provide additional features that make sure to alert you if they think someone has attempted to steal your identity.
Beware of Payoff Scams
As we mentioned earlier, fixing credit doesn’t happen overnight. Just like “get rich quick” schemes, there are companies out there that prey on people in debt who are desperate. There are a few scams out there that claim to allow you to immediately get rid of your debt and improve your score right away. You should stay far away from offers like this.
Scams often have signs that you can spot. They might ask you to pay them before they’ve done anything for you. They could also want you to avoid talking to credit reporting agencies.
The Credit Repair Organization Act says that it’s illegal for these companies to charge you before their service is provided, so don’t fall prey to something that sounds like it’s too good to be true.
Prioritize Paying Off Credit Cards
If you have a lot of credit card debt that is causing you stress and your credit score is going down, you should focus on paying the balance off. You should cut down on unnecessary spending and make the credit card statements your number one priority. Set a goal for yourself for when you want your credit card to be paid off and try to stick to it.
Only utilize less than 30% of your available credit and pay it off right away to improve your score. Never spend more on your credit card than you make in a month. This will put you in a vicious cycle of only being able to pay the absolute minimum in order for you to have funds leftover for other responsibilities like groceries, rent, and utilities.
Once the credit cards are paid off, don’t cancel them. Your available credit has a large impact on your score, so you want to leave the accounts open with no balance on them.
If any of your debts have gone to collections you should focus on resolving this. Unfortunately, once your debt is in collections your score will not improve when you pay it off. If possible, you should pay off your debts before they ever get to this stage. Collections on your credit report can take up to seven years to repair. A lot of companies will be willing to work with you in terms of payment plans, so if you’re unable to make payments for any reason, get in touch with the creditor and see what kind of arrangement they may be able to offer you.
Do Not Apply For More
There are a lot of incentives for applying for new credit cards. A lot of retail stores offer a large discount on your purchase if you apply for their store credit card on the spot. However, every time you apply for a credit card, they do a hard inquiry on your credit. If you do this a lot in a short period, it can negatively affect your credit score.
You should also consider making a strict budget for yourself. This can help you spend less money and only make purchases that make sense for you financially. A lot of apps on your phone offer this kind of service. You can input your monthly income and all of your bills. The app can then tell you how much you can afford to spend on groceries or gas each week without going over budget.
If you aren’t sure exactly how much you make in a year, you can look at your tax returns from previous years. This will tell you your net income after taxes that you took home that year. You can also take your weekly salary and multiply it by 52, or you can just average out your yearly income by averaging income from the past 3 months and multiplying by 3. This will make it easier to budget long-term.
You should subtract your regular monthly payments from your income to figure out how much you left over. These include bills that are constant like a mortgage or a car payment. Then you can decide how much you have every month to spend on entertainment or special occasions.
A good credit score is closer than you think if you stay committed.
Credit sounds complicated, but it’s really not. Once you come up with a strategy to rebuild your credit, the process may be time-consuming, but it will be doable.
The first step to improving your credit scores comes with checking your credit and doing a deep dive into your credit history. Your FICO score tells lenders a lot about your borrowing history, so pay attention to what your report identifies as the biggest impactors to your score. Most often, it will be your credit usage, also known as credit utilization.
It may take a little while to see results, but eventually, your score will go up. If you have so much debt that you cannot pay off your credit cards anytime soon, you’re not stuck with bad credit — consider consolidating your debt, or even settling debt if appropriate. The short-term impact of these two options and damaging your credit score may be worth being debt free and rebuilding credit and wealth in the long run.