Thursday, August 26, 2010

Steps to Fixing Your Credit

Fixing your credit can make a substantial difference in your financial life, because it can save you money on interest and make it easier to get approved for financing. If you have a low credit score, there are a number of steps you can take to improve your credit rating.

Review Credit Reports

    Before you can effectively fix your credit report, you must review your credit reports from the three major credit bureaus: TransUnion, Experian and Equifax. You can obtain a copy of your credit report from each of the three bureaus for free once every year by going to the Annual Credit Report website.

Dispute Mistakes

    You should review your credit reports to determine whether are any mistakes were made. In some cases, creditors report inaccurate information, which can bring down your score. If you find a mistake on your credit report, contact the credit bureau and provide documentation of the mistake. If you can verify that the information is incorrect, the bureau can fix the mistake, which will boost your credit score.

Pay Down Balances

    Another way to improve your credit score is to pay down balances on your credit accounts. If you can reduce the balances below 30 percent of your available credit limit, it will help when the credit bureaus calculate your credit score. If your accounts are "maxed out," it appears you do not know how to handle your credit. Paying down the balances can make a significant difference in your score.

Making Payments

    When trying to repair your credit, you must always make your payments on time. This is true whether it is a credit card payment or an electric bill payment. Your creditors regularly report to the credit bureaus, and just one late payment can have a significant negative effect on your credit. This is the single biggest factor when calculating your credit score, and after a few months of making on-time payments, your credit should start to improve.

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