How to Repair Your Credit in 5 Steps
If you’re looking to repair your credit , you’re not alone. Millions of Americans have credit problems, and many of them don’t know where to start.
But don’t worry – repairing your credit is easier than you think, and it can be done in just five simple steps.
Follow our guide and you’ll be on your way to a better credit score in no time.
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Get your credit report and credit score
The first step to repairing your credit is to get a copy of your credit report and credit score. By law, you are entitled to one free copy of your credit report per year from each of the three major credit reporting agencies — Equifax, Experian, and TransUnion. You can get your report for free by visiting AnnualCreditReport.com.
Your credit score is a numerical representation of your creditworthiness, based on the information in your credit report. You can get your score from a number of sources, including CreditKarma.com and myFICO.com.
##Heading: Look for errors and dispute them
The next step is to look for any errors in your credit report. If you find any, you can file a dispute with the relevant credit reporting agency. Be sure to include any supporting documentation that you have to back up your claim.
##Heading: Pay down your debt
Another important step in repairing your credit is to pay down your debt, which will help improve your credit utilization ratio — the amount of debt you have relative to the amount of available credit you have. A good rule of thumb is to keep your utilization ratio below 30%.
##Heading: Improve Your Payment History
Your payment history is one of the most important factors in determining your credit score, so it’s important to make all of your payments on time — or even early if possible. One way to do this is to set up automatic payments from your checking or savings account so that you never have to worry about missing a payment again.
##Heading: Use a secured credit card
If you have bad credit, one option that may be available to you is a secured credit card. With this type of card, you will need to provide a security deposit — typically equal to the amount of the line of credit — which will be used as collateral in case you default on the card. While this means that you will be responsible for repaying the full balance if you do default, it can help you build up positive payment history which can eventually lead to an unsecured card with better terms.
Identify the negative items on your credit report
The first step is to get a copy of your credit report and identify the negative items on it. Each item will have a date next to it, which is the date the item was added to your report. If any of the items are more than seven years old, you can usually dispute them and have them removed from your report.
Dispute the negative items on your credit report
The first step to repairing your credit is to dispute the negative items on your credit report. You can do this by contacting the credit bureau that is reporting the negative item and requesting that they investigate the matter and remove the item if it cannot be verified. This process can take some time, but it is worth it to have a clean credit report.
Create a budget and stick to it
A budget will help you track your spending and figure out where you can cut back. Use our budget worksheet to get started. Once you have a budget, make sure you stick to it. It may be difficult at first, but stick with it and you will see your spending – and your debt – decrease over time.
Monitor your credit report and credit score
Monitor your credit report and credit score: This is the first and most important step in repairing your credit. You need to know what is being reported about you and whether it is accurate. Get a free copy of your credit report from annualcreditreport.com and check it for any errors. If you find any, dispute them with the credit bureau.
In addition, monitoring your credit score will give you an idea of where you stand and how much work you need to do to improve your credit. You can get a free credit score from Credit Sesame.