Having good credit can make your life a lot easier in a number of different ways. It will be easier to rent an apartment, easier to get a loan, more affordable to get a mortgage and simpler to get a car. Unfortunately, many people struggle with subpar credit that can come from a variety of sources.
Some may have had a medical emergency that forced them to take out loans, while others may have simply been irresponsible with their spending habits over the years.
However, simply because you have bad credit now doesn’t mean you will forever. In an effort to help, this guide is going to take you through 3 steps that you can take to help you clean up your credit report.
Dispute Errors on Your Credit Report
An underrated way to clean up your credit that many people might not think about is to check out your credit report. Every year, you can get a copy of your report for free. Your credit report is essentially a detailed look at your different credit accounts and history.
You should look closely at each line, and check for errors. Errors on credit reports do happen and can have a significant impact on your credit score. If you notice them, be sure to dispute these errors with the credit bureaus. These disputes won’t always be successful, but is certainly worth a try.
Also, removing negative items is the fastest way to raise your credit. If you can rid your report of the marks and items that hurt your credit, you will often see a quick and dramatic improvement.
Know the Factors That Influence Your Credit
Another way to clean up your credit is to become more knowledgeable about the factors that influence your credit score. This includes your payment history, how much you owe, how long your credit accounts have been open, how often you apply for new credit and the types of credit that are in use.
Each factor is important, but some (like your payment history and amounts owed) will hold more weight in terms of how much they impact your score. Once you know these factors, you will be able to keep them in mind at all times.
The better you know how each action impacts your credit, the better equipped you will be to keep your credit in a good spot and what you need to do in order to improve it.
Lower Your Credit Utilization Ratio
One thing that everyone should do right now if they are looking to improve their credit is to lower their credit utilization ratio. This is the ratio of how much credit you use to how much credit you have available to use. In general, you want this ratio to be lower, often under 30%.
If this ratio is too high, it may show lenders that you rely too much on credit cards, which is risky. The more risky you are in the eyes of lenders and creditors, the lower your credit score will be. So take a close look at how much of your available credit you are using, and either find ways to bring it down, or increase the amount of credit you have available (if you can afford and handle it).
In conclusion, these 3 steps will be able to help you clean up your credit report and ensure your credit is in good standing. Your credit may not improve overnight, but if you remain consistent, you will eventually see improvement.