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5 Effective Ways to Improve Your Credit Score

Effective Ways to Improve Your Credit Score

Your credit report and number score provide a detailed summary of your credit history. When you apply for loans, lenders use one or more reporting bureaus, including TransUnion, Experian, and Equifax, to access your information. If the Covid-19 pandemic caused your credit scores to fall, now is the time to create a strategic financial plan. In this article, we provide five effective ways to help you increase your credit scores and put you on the path of financial stability again.

  1. Request for Free Copies of Your Credit Reports

You might be wondering, why do my loans keep getting declined? The answer could be your credit score. You can learn your credit score numbers and history from all three credit report bureaus. Annual Credit Report is an online website accessible to consumers to request free copies. You can only receive one document from each bureau per year at no charge on this site.

  1. Check Each Report for Errors and Fraudulent Accounts

When you receive your credit reports, check for errors, fraudulent accounts, and incorrect information. The following factors influence your credit scores;

  • Collections
  • Court Judgments
  • High Credit Card Balances
  • High Loan Balances
  • Many Inquiries for Hard Copies of Credit Reports
  • Missed and Late Payments

You can easily dispute erroneous information on the bureaus’ websites or through sites like Credit Karma. Sometimes, you may have to contact the lender listed on the credit report that provided the information. Once you submit your dispute, it will take up to 30 days to investigate and receive the result.

  1. Create a Budget

The first step to rebuilding your credit is to create a budget. You want to control your money and not let your finances control you. A budget will help you with efficient financial planning and monitoring your expenses, earned income, taxes, and savings, and retirement portfolio. Mentally, develop a mindset comprising self-discipline to take charge of your spending habits to save.

Record your goals where you want to be financially five years from now and how you plan to accomplish them. A strong mindset and self-discipline will help you with the journal. Compare your actual monthly expenses, income, and savings to your budget to ensure you live within your financial means and save as planned.

  1. Consolidate Your Outstanding Debts

Debt consolidation is essential if you have three or more open credit accounts with high interest rates and balances. This can include your mortgage, credit cards, and lines of credit. Shop for lenders with the lowest interest rate that offer mortgage loans with debt consolidation. It will enable you to save money for the future and improve your credit.

  1. Monitor Your Credit Frequently to Track Your Progress Status

Observing your credit progression will help to motivate you in reaching your financial goals. Monitor your credit often using online services for any changes in scores and your credit history. Credit Karma, for example, allows you to access your credit scores from two reporting bureaus. A valuable feature on the site is the ability to receive alerts for recent changes to your score and report by email.

What Information is Useful in Credit Score Calculation

Most lenders use FICO credit scores based on the consumer’s credit history. To calculate the credit score, five significant factors carry a total weight of 100 percent. Your payment history carries 35 percent, and the use of credit carries 30 percent in determining your credit scores. These two factors carry the most weight, followed by the credit account age at 15 percent. Your credit mixture and new credit inquiry weigh the least, at 10 percent each.

Request for your free credit reports today at AnnualCreditReport.com. Start paying your bills on time because it carries the most weight in calculating your score. Use credit wisely, budget, and consistently monitor your reports for accuracy and fraud to rebuild good to excellent credit.

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