A credit denial can hurt more than just your ego. It can cause long-term damage to your finances. People with poor credit typically pay higher interest rates on borrowed funds, shell out more for security deposits, and sometimes even have trouble securing their dream job. Scores that fall below 600 can negatively affect how you live.
Whether you’re new to credit or looking to rebuild a damaged profile, paying a credit repair company to help the situation is costly and unnecessary. Instead, consider these six DIY actions you can take to improve your credit score without spending a dime.
Learn the primary credit scoring factors.
Before you can improve your credit score, you need to know how it’s calculated. Credit scoring agencies like FICO® and VantageScore® use data from major credit report reporting bureaus like Experian®, Equifax®, and TransUnion® to calculate your score. These agencies collect data related to:
- Payment history, e.g., on-time, past-due, or delinquent accounts
- Amount owed, e.g., available credit in relation to credit limits
- Length of credit history, e.g., when accounts were opened or when you last used them
- New credit, e.g., number of accounts opened in a short time frame
- Variety of credit lines, e.g., revolving credit versus installment loans
You will likely have more than one credit score, depending on the scoring model used and the agency calculating the score.
Order copies of your credit history reports.
Some creditors report payment histories to one bureau, while others report to all three. Each report will vary in detail and format. They typically include a summary explaining the main factors affecting your credit health. Take note since these are likely contributing to your low score. The reports might even offer personalized suggestions on how to improve your credit profile.
Order free copies of each credit history report from AnnualCreditReport.com.
Dispute data entry errors.
Incorrect or incomplete information on your credit reports can harm your credit health. Check that all listed accounts belong to you, balances and limits are accurate, and late payments are correctly recorded. Correct any double entries or missing information, as they could lower your score. To dispute errors, follow the credit bureau’s policies to have them removed.
Catch up on delinquent accounts.
Payment history is the primary factor in calculating your credit score. The longer an account remains past due, the more it can damage your credit. Get caught up as soon as possible by reviewing your budget and cutting back on unnecessary spending. Then redirect those funds to delinquent credit accounts.
If necessary, increase your income by working overtime or taking a second job until all accounts are current. Reassess your spending habits if you’re having trouble paying bills in full each month.
Late payments can also lower your score. Set up automatic bill pay to help ensure payments arrive on or before the due date.
Eliminate lingering debt.
Carrying debt month to month not only weighs on your budget, but it can also hamper your credit score. Account balances that remain close to their credit limit will lower your credit utilization rate, another key metric in the calculation. Keeping your ratio below 30% is one of the best ways to improve your score. For example, if your credit line is $1,000, limit your credit card spending to $300 at a time.
Pay off credit card debt in full each month. You do not need to maintain a credit card balance to improve your score. Paying in full every month will help you keep your overall credit utilization low and save money on interest charges.
Use free credit support services.
If you’re new to credit or trying to rebuild a damaged credit profile, you can make significant progress within 30 days. Experian Boost® is a free service that could help improve your score with little effort. When you link your bank account to the service, it can factor in on-time payments made to utility companies, phone providers, streaming services, and landlords.
Maintaining good credit is an essential part of financial stability. Improved scores give you more choices in how you live, work, and play.