If you’ve made a few financial mistakes or fallen on hard times in the past, your credit score is likely below average. With a low credit score, it can be difficult to obtain approval when you apply for credit. When you do receive approval, the terms of the loan will be unfavorable. In the long run, you’ll pay more for a loan than a person with a high credit score would. It is an unfortunate reality that the credit score system often seems to punish those who need favorable loan terms the most. The good news is that fixing your credit score is possible. Making sound financial decisions is the best way to improve your credit score. However, it is also possible to fix your credit score by finding and removing inaccuracies in your credit report.
Pay Your Bills on Time
The best way to begin improving your credit score is to pay all of your bills on time. Even if you’ve had issues with late payments in the past, it’s never too late to begin establishing a track record of on-time payments. As negative items on your credit report become older, they’ll affect your credit score less. If you have trouble remembering when payments are due, you can have your bank or credit card issuer send reminders or simply deduct payments automatically.
- If you have only ever made one late payment on an account, ask the creditor to remove the late payment from your credit report in light of your otherwise spotless history. Some creditors may remove a single late payment as a courtesy for an otherwise good borrower.
- If you know that you will not be able to make a payment on time because you’ve had a financial setback, talk to the creditor. Telling the creditor about the setback will not prevent late payments from appearing on your credit report. However, it may prevent the creditor from sending the account to a collections agency.
Reduce Your Credit Utilization
When calculating your credit score, credit reporting agencies consider how close your outstanding balances are to your total available credit. If you are using almost all of your available credit, your utilization may lower your credit score slightly. You shouldn’t open new credit accounts as a strategy to lower your utilization, though, because new accounts may lower your credit score as well.
Credit reporting agencies consider total credit utilization as well as the ages of accounts when calculating a credit score. For the best possible credit score, your credit report should show accounts with plenty of on-time payments and low overall utilization.
Dispute Inaccurate Items on Your Credit Reports
The three major credit reporting agencies have the legal requirement to provide one free credit report per year to every consumer who requests one. Obtain your free credit reports each year to confirm that the reporting agencies are keeping accurate records of your credit history.
When you examine your credit reports, you may find inaccuracies such as late payments that you’re certain you made on time or accounts that don’t actually belong to you. An account belonging to someone else may appear on your credit report for a variety of reasons from clerical errors to identity theft.
You can dispute inaccurate items on your credit report. To dispute an item, write a letter to the credit reporting agency. In the letter, you should describe exactly what you believe is inaccurate. You should also supply evidence to support your claim. Send the letter by certified mail so you’ll know when the credit reporting agency receives it. Credit reporting agencies have 30 days to research and respond to disputes.