Credit is often the last thing we think of when we start planning for a large purchase – like a home or a car. The problem is, it takes time to build or improve credit.
And if you only find out at the time of application that your credit isn’t good enough to be approved, you could be stuck waiting for months or even years to get to the point where it is. Want to make sure that doesn’t happen to you? Follow these seven steps.
1. Obtain your credit reports
Step one to fixing your credit on your own is obtaining your credit reports, which you can do through AnnualCreditReport.com. Once you have your reports, the goal is to ensure the accuracy of all the date included.
Once you do that, read here to learn what to look for when reviewing your credit reports.
2. Review your credit reports for red flags
It’s important to scan your credit report for red flags such as mistakes in your personal information or errors like incorrect data about one or more of your accounts.
If you don’t spot any of these red flags in your credit report, continue to step four. If you find any errors on your credit report, continue to step three. And if you don’t have any errors, but you do have some of the other red flags, pay special attention to step seven.
3. Dispute errors you find on your credit reports
Finding errors on one or more of your credit reports can be disconcerting, to say the least. The good news is that you can get them fixed. All you have to do is dispute the error with the credit reporting agency showing it. Or, you can turn to companies like Upturn Credit to do it for you.
Click here to learn more about what you can dispute on your credit report, and here to find out what you need to do it.
4. Obtain one of your credit scores
Once you know your credit reports are an accurate representation of your financial history, the next step is to find out the three-digit number that dictates whether your credit is good or bad (or one of the stages in between). In other words, it’s time to find your credit score.
However, you don’t have just one credit score — no one does. In fact, you have many credit scores. That said, knowing one of your scores can give you an idea of where you stand.
5. Make note of the credit score range you fall into
The credit score you see when you obtain one of your credit scores isn’t necessarily the same one lenders will see. Because of that, you might find it more helpful to pay attention to the range that your credit score falls into. Read this to learn more about credit score ranges.
6. Review the factors affecting your scores
Reviewing your credit reports should have given you a pretty good idea of what your financial history looks like to prospective lenders, and seeing one of your scores and the range it falls into should have given you a good idea of where you stand. But what about the specific things that play into your scores?
This part is deceptively simple. A lender wants to know whether or not you’ll pay your monthly bill, and they use your financial history and current obligations to try to predict if you can and will. Therefore, payment history and credit utilization (the amount of debt you owe in comparison to the amount of credit available to you) are the two most important factors in your credit score. Get those under control, and you can set yourself up for credit success.
If you fear your current state of credit might not be giving a flattering image to prospective lenders, then you can turn the ship around. That’s what the next step will show you how to do.
7. Make a credit-improvement action plan
Credit can always be improved upon, and it might not take as long as you think. All you have to do is make a plan. Here are a few things to start with:
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Pay all of your bills on time, as payment history is the most important factor of your credit score.
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Deal with collections accounts swiftly. Here are some tips on dealing with debt collectors and resolving delinquent accounts.
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Start paying down revolving debt, as many experts suggest keeping credit utilization at or below 30 percent.
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Fix mistakes on your credit reports, as explained in step three above.
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Keep old accounts with a positive history open, as they help build your credit history.
Want to learn more? Fixing your credit is important, but so is maintaining it. Click here to learn more about what to do after fixing your credit to ensure that you don’t lose the good standing you’re working so hard to build.
This article originally appeared on Upturn.com and was syndicated by MediaFeed.org.
Featured Image Credit: Anchiy.
