It's time to celebrate and ring in the New Year, but it's also a good time to make resolutions about the things in your life that you want to change. For example, is your credit rating exactly where you want it to be? If damaged credit is preventing you from getting loan approvals or desirable interest rates, now is the time to turn things around. Make this year all about credit repair!
Finding Out Where You Stand
Many consumers don't know this, but you are entitled to a complimentary copy of your credit report annually from each of the 3 major reporting bureaus (Experian, Equifax and TransUnion). If you haven't checked your credit in a while, it's a good idea to request all 3 because each document may be at least slightly different from the others.
- Look for possible errors and unfamiliar items. Take the time to go over your documents carefully, making note of anything that doesn't look accurate. You will want to dispute any information that you believe to be false. There is always the chance that something has been inaccurately reported, or you may discover that your identity has been compromised.
- Report any item that you wish to dispute to the correct bureau. You must submit your claim in writing and you should include a copy of the original credit report with the questionable items circled. Unless the dispute is judged to be frivolous, the agency in question is required to address your concern. If it is discovered that the information is, in fact, incorrect, the negative mark will be removed from your report. The other two bureaus will then be notified about the change so that they can make their own corrections.
- Establish a credit monitoring schedule. Once you've determined that your credit reports are accurate and up-to-date, you should request your free copies on a regular basis. Because there are 3 agencies, you may want to obtain 1 copy from 1 bureau every 4 months. This way, you'll be covered throughout the year.
- Keeping track of your credit reports is a good way to make sure that your rating won't be brought down by inaccurate reporting. It will also allow you to keep track of your goals as you work towards achieving better credit.
Taking Measures to Boost Your Credit Score
All of the information on your credit reports is reflected in your credit score. This is the number that lenders look at in order to predict how responsible you will be as a borrower. You can request your credit score from any of the credit reporting bureaus (for a fee), through CreditKarma.com (no charge), or from MyFico.com (for a fee). Want to increase your credit score? Make a plan and get to work.
- Make a budget. Add up all of your monthly post-tax income and write that number down. Now, calculate the total of all of your monthly bills and necessary expenses (gas, groceries, etc.). Subtract your regular expenses from your income, and that number will represent the amount that you can either put towards debt or save every month.
- Get current with your bills. Every late payment causes your credit score to drop. If you know that you've fallen behind, use the money that you're saving with your budget to get on track with what you owe. When you're where you need to be with your recurring debt, organize a bill-paying system that works for you in order to never be tardy again.
- Get your credit card balances under control. If you are carrying high balances on high interest credit cards, you could be on the fast track to heavy debt. Not only will these bills be increasingly difficult to pay, but charging too much can harm your credit score even if you're making your payments on time. This is because your debt to income (DTI) ratio is thrown off balance when you owe creditors more than what your income can realistically support. Ideally, you should be using less than 30% of your available credit at any given time.
While keeping a close eye on unnecessary spending and paying down debt, it's important to keep your goals in mind. And don’t neglect your savings. Putting money aside for emergencies is important to your financial plan.
All of your hard work will pay off in the end when you have the kind of credit score that will earn you loan approvals and prime interest rates.
When it's Time to Rebuild
Once you're in a good place financially, you will want to start looking for ways to proactively build your credit score. Responsible credit card use will boost your credit rating. And if you know that you'll have trouble being approved for an unsecured card, applying for a secured card is a good solution. Timely payments on a secured credit card may eventually earn you the opportunity to open an unsecured line.
In an effort to build a good credit mix and get the best credit score possible, you should consider taking out a personal loan or an auto loan. If your credit score is still too low to get a loan from a bank or credit union, there are alternative lenders out there who can work with your situation.
New Year, New Car
If purchasing a better, more reliable vehicle is on your to-do list for the New Year, Auto Credit Express can help you achieve this goal. We can connect you with a local dealer who is qualified to get you financed even if your credit is severely damaged. And with every timely payment that you make on your car loan, your credit rating will gradually improve. Now, that's reason to celebrate.
To get started, just fill out our fast and secure online application.