Having a good credit score is essential in today’s economy, and not just for making large purchases. It also has a big impact on rental applications and insurance rates. If your credit score took a dive as a result of a financial setback, or if you just want to improve your score, there are things you can do. You have resources at your disposal like legal rights advocates who can help you understand your consumer rights, as well as free tools like Experian Boost. Here are a few simple steps you can take to repair your credit score.
Find and dispute errors.
Credit report errors are common and can cost you quite a few points. It is your responsibility to find and correct errors in your credit report. Filing a dispute against a credit bureau can be daunting, but some law firms can help you with the process. There are plenty of legal services that can help you understand your legal rights regulated by the Consumer Financial Protection Bureau.
Aside from giving you legal advice, Your Legal Rights Advocates can help you take legal action against collection companies that violate your consumer rights. If a debt collector is harassing you with phone calls and text messages, giving your personal information out to others, or otherwise violating your rights, you should contact a lawyer referral service and take legal action right away.
Get credit for utility and phone payments.
Building a good credit score can be difficult for those just starting out. Lenders aren’t likely to open up a credit line for you if you have no credit for them to check. If you need a leg up or just want to boost your credit score, some credit bureaus have rolled out new tools that can help. Experian Boost, for example, is a free product that allows you to factor in utility and phone payments. Users have seen an average increase of 10 points to their credit score and 13% of users even moved up an entire credit band. Simply connect your bank account and verify which payments you want to add to your score.
Keep credit card balances low.
You don’t have to completely pay off your credit card balance every month — and in fact, you shouldn’t. Carrying a small balance shows that you use your credit responsibly. Your credit utilization ratio is one of the most important factors that go into your credit score. It is determined by dividing your current total balance by your total credit limit. The ideal ratio is 30% or less. So if you have $10,000 of total credit, you should try to keep your total balance below $3,000. Increasing your credit limit will also help improve your credit utilization ratio.
Make smart investments.
Investments don’t have a direct impact on your credit score, but they can improve your overall financial health. This in turn can help you manage your debt and boost your score. While COVID-19 is as much of a global financial crisis as it is a health crisis, senior executive and chair of AIMCO Mark Wiseman advises investors to think long term. Wiseman, former Senior Managing Director and Global Head of Active Equities for BlackRock, currently manages the Canada pension plan for the Alberta government. With his many advisory roles, Mr. Wiseman is often an expert consultant in financial news.
In recent months, Wiseman co-wrote a piece in the Wall Street Journal detailing how the economic effects of calamitous events fade over time. Mr. Wiseman also notes that global crises, such as the Spanish Flu, are often followed by periods of economic growth and can actually create unique investment opportunities. Wiseman emphasizes that investors should not ignore the short-term implications of COVID, but they shouldn’t abandon their long-term investment plans, either.
This last year has been a financial challenge for most of us. Don’t panic if your credit score took a recent dive. There are many ways you can repair your score over time, from smart investments to disputing errors. You must simply take the initiative to bounce back.