A good credit score can result in a lower home mortgage rate or getting approved for renting a home. We all try to maintain a good credit score. Sometimes, though, life throws us a financial curveball and that score declines. What steps can we take to repair it?
Reduce your credit utilization ratio. Your credit utilization ratio (CUR) is the percentage of a credit card’s debt limit you have used up. Simply stated, if you have a credit card with a limit of $1,500 and you have $1,300 borrowed on it right now, the CUR for that card is 87%. Carrying lower balances on your credit cards may tilt the CUR in your favor and help produce a better credit score.[1] We encourage maintaining a zero-balance credit card and paying it in full each month.
Review your credit reports for errors. You are entitled to receive one free credit report per year from each of the three major U.S. credit reporting agencies – Equifax, Experian and TransUnion. You might as well request a report from all three at once. As the federal government’s Consumer Financial Protection Bureau (CFPB) notes, you can do this at annualcreditreport.com. About 20% of credit reports contain mistakes. Upon review, some borrowers spot credit card fraud. Others notice botched account details or identity errors. On its website, the CFPB offers sample letters and instructions you can use to dispute errors.[2]
Behavior makes a difference. Credit card issuers, lenders and credit agencies believe that payment history paints a reliable picture of future borrower behavior. Consistency in paying your bills on time will help build your credit.
Beyond that, 15% of your credit score is based on the length of your credit history – how long your accounts have been open and the pattern of use and payments per account.
Taking control of your finances will help you take control of your credit! We are here to help. If you have any questions, please reach out to us at financial.freedom@lpl.com
[1]https://www.nerdwallet.com/blog/finance/credit-utilization-improving-winning/
[2]https://www.consumerfinance.gov/about-us/blog/common-errors-credit-report-and-how-get-them-fixed/
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
Email me your questions at financial.freedom@lpl.com or call 541-574-6464. You can also post you question on our Facebook page: https://www.facebook.com/FinancialFreedomWealthManagementGroup
