Achieving a good credit score is an everyday job and keeping it healthy is important, as doing so could prevent you from getting things you want to improve your quality of life, like renting a nice apartment, buying a new car or buy the house of your dreams.
Imagine that your credit score is like the score you get after you borrow money and with which a lender can see how responsible you are when it is your turn to pay it back.
If your credit score is high, it means you pay your bills on time and don’t borrow more money than you can afford. If, on the contrary, it is low, you can represent a risk for your lenders and lose the opportunity to obtain money or credit.
There are reporting agencies that collect the data and calculate that score that they will give you according to your habit in terms of expenses and payments. One of the most recognized is Equifax, with which you can check how your credit score is. These range from 300 to 850. Within that range, scores can generally be placed into one of five categories: poor, fair, good, very good, and excellent.
According to Equifax, most credit score ranges are similar to the following:
800 to 850: Excellent – People in this range are considered low-risk borrowers. They may find it easier to obtain a loan than borrowers with lower scores.
740 to 799: Very good – People in this range have demonstrated a history of positive credit behavior and may have an easier time getting approved for additional credit.
670 to 739: Good – Lenders generally view those with credit scores of 670 or higher as acceptable or lower risk borrowers.
580 to 669: Fair – Lenders may consider them riskier and may have trouble qualifying for new credit.
300 to 579: Poor – People in this range often have a hard time getting approved for new credit. If you are in the poor category, you may need to take steps to improve your credit scores before you can get any new credit.
HOW TO REPAIR MY CREDIT STEP BY STEP
STEP 1: CHECK YOUR CREDIT SCORE AND REPORT
It is very important that you know what your credit score is so that you are clear about your position according to the lines shown above. But not only the score is important: you have to verify your report. This credit report contains information about how you have used your credit in the last 10 years. Most creditors report to three bureaus: Equifax, Experian, and TransUnion. That is why it is worth verifying the information of all three. The recommendation is that you check your score once a month.
Here you can check your credit score.
STEP 2: CLAIM ANY ERRORS YOU SEE IN YOUR REPORT
If you find any errors on your credit report, you should dispute directly with the credit reporting company in which you found it. It is important that you explain in writing where the error is and that you accompany it with documents that validate your claim.
Here’s how to claim an error on your credit report.
STEP 3: PAY YOUR BILLS ON TIME
This is a very important point because your payment history makes up 35% of your credit score. One of the most efficient mechanisms so that you can have your payments made on time is the self-payment, however, it is essential that you make sure that when your payments are withdrawn, there are sufficient funds.
If there are bills that self-pay does not apply to, such as medical bills, you should pay them as soon as the bill arrives, and if you don’t have the money, contact us to make a payment plan.
Another important detail is that, if you work for yourself, and do not receive pay on fixed days, you should not have the self-pay system, unless you are sure that you have enough funds each day that money must be withdrawn.
STEP 4: REDUCE THE BALANCE OF YOUR ACCOUNTS
You will see that your credit score will increase if you reduce the amount you owe on your credit cards. Your credit utilization ratio is measured by comparing your credit card balances to the total card limit. This is how lenders rate how well you manage your finances. In general, a utilization of less than 30% and greater than 0% is considered good.
STEP 5: MINIMUM AND CONSISTENT PAYMENTS
One of the fastest ways to see an increase in your credit score is to make minimum payments on all of your accounts each month. Ideally, you should pay each outstanding balance before the due date, as it helps you save on interest in the long run. However, if you can’t make it every month, focus on not exceeding 30% of the total balance and making consistent minimum payments.
If you have open cards but don’t use them, resist the urge to close them. Instead, buy something inexpensive once a month and pay the bill right away.
STEP 6: DON’T GO OVERWARD WITH CREDIT APPLICATIONS
If you already have 30% of your credit committed, avoid accepting new card or loan offers. Focus on managing your budget and keeping your accounts up to date. This is an everyday job, but it can be done with organization.
