Effective steps toward repairing your credit

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January 07, 2025 | Alliant Credit Union

Have you seen those ads of companies offering to remove bad credit information from your credit report? While some companies can help if there are errors on your report, fixing accurate information that is affecting your score is too good to be true. There isn’t a quick fix to remove accurately reported information, instead to improve your credit score, you need to take steps to repair it over time. Learn what you credit score is based on and how to improve it.

What you'll learn:

Requesting your credit report

The first step is to know what is in your credit report. You have the right to obtain a free copy of your credit report (from each credit reporting agency) once a year. Simply visit www.annualcreditreport.com to download your copy and review it in detail. You can request your credit report from all three credit reporting agencies at once or if you prefer, you can monitor your information by requesting a copy of your credit report once every four months.

The second step is to understand your credit score. Lenders use credit scores to determine who qualifies for a loan, what interest rate and at what amount. In some cases, it can also be used to determine insurance rates, rent an apartment, have telephone or other utilities connected, and even land a job. Most lenders do not divulge which scoring models they are using. Alliant members are eligible to receive their VantageScore 3.0 free of charge.

The VantageScore was created in collaboration with the three major credit bureaus: Equifax, Experian, and TransUnion it is offered to you free of charge through Alliant’s Online Banking. This score is updated every quarter.

What is your credit score based on

Understanding your credit score is the first step in improving and maintaining better credit. Your credit score is based on a few things with varying weights attached, such as your payment history (35%), debt (30%), length of credit history (15%), new credit accounts and applications (10%) and types of credit you use (10%).

Credit score improvement tips

If your score is lower than what you expected, here are some tips to help you repair that credit score:

1. Pay your bills on time

Utilizing services like Bill Pay through Alliant Online Banking or auto-debit through certain credit card or utility companies will show you can pay your bills on-time and increase your credit score over time. The only catch with these services is you have to be certain you have the money in your account when the funds are withdrawn. Otherwise, you could get assessed late fees from your financial institution.

2. Don’t max your credit limit

You may have a credit limit of $10,000, but don’t use it all! Showing restraint when it comes to spending gives creditors faith that you are responsible, and they’ll be more likely to lend to you or increase your line of credit in a time of need. Try not to charge more than what you can pay back each month. Having a lot of credit available to you is great; using only a small amount of it is better.

Keeping the amount you borrow below 30% of your available credit is a good rule of thumb. This is called your credit utilization rate, and helps lenders determine how well you’re managing your current credit. So, if you have a credit limit of $10,000, keeping your spend below $3,000 will help your credit. If you go above the 30%, you can always pay part of your credit card off before the statement is due to keep your spend under 30%.

3. Keep all your accounts current

Any outstanding balances you have with other accounts or creditors need to be paid off as quickly as possible for your credit to begin to be repaired. Know that simply paying off past due balances will not remove them from your credit report, but will help your score increase over time. Less debt equals a higher credit score.

4. Seek professional help

If you feel like you are in over your head and don’t think you can start this journey alone, call a professional to help you. Just remember, when reaching out to professional or researching companies, be wary of any offer that seems too good to be true, because these might be scams.

 

Repairing your credit is a long process, but it is a rewarding one! Start today and kick your New Year off on the right foot.


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