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How to restore your credit



  Repairing credit

Repairing your credit is not as complicated as you may think.


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Like your reputation, it takes years for your credit to build, but only moments to destroy. And once things go bad, it can lower your credit score with it, which can take months or years to fix.

Repairing your credit takes time and hard work, but it is worth it. A substantial credit history or sufficiently high credit score is preferable to buy or lease a car, rent or buy a house or apartment, and access a high-limit credit card. And the impact of a bad credit score can be far-reaching: it can subject you to higher interest rates when you borrow, narrow your housing options, and even hamper your job prospects. Fortunately, today there are some manageable steps you can take to improve your credit score.

First, you need to understand exactly what you owe, who you owe it to, and how it affects your credit history. Free reports from the three agencies are now available weekly due to the coronavirus pandemic . Take advantage of this offer.

"In the short term, during the financial uncertainty that many Americans are currently facing due to the pandemic, it is important to keep the health of your credit score in mind," said Ken Lin, Credit Karma CEO and co -founder.

If your credit report contains inaccuracies ̵

1; such as an account that you have not opened or one that has been paid off that still shows a balance – file a dispute with the agencies. Marking errors cost nothing and can improve your score.

Read CNET's manual on how to read a credit report to understand what's inside.

Make a Budget

Once you know where you stand, it is time to prepare a financial plan. The first step is to create a budget. Look at your monthly income and expenses. The best place is to check bank and credit card statements to see where the money is going.

Try to cut expenses as much as possible, be it eating out less or Cancel Netflix . It is also important to set some goals, such as paying the balance on a credit card within a certain number of months. This process can take time and seems daunting, but it is essential to understand where your money is going.

See also: The best budgeting apps in 2020

Calculate your monthly debt

Then it's time to see what you owe. View the statements of the different creditors and see the minimum payment for each account. If any of your accounts have been transferred to a collection agency, please contact them for a payment plan.

Prioritize Your Debts

The accounts with the highest interest rates should be your top priority. The faster you pay them off, the less you pay in interest (credit cards – and especially store credit cards – typically have higher interest rates than loans). But there is another important factor: your & # 39; credit usage & # 39 ;.

"Credit usage is the ratio of what a person owes to their credit card and how much of their total limit they have used," said Lin. "Credit usage can be quickly updated to improve (or damage) credit. If you constantly maximize your credit card and have it included on your monthly bill, it could negatively impact your score."

The ideal credit usage ratio is 30%, which means that your combined credit card balance must not exceed 30% of the combined credit limits. The closer you get to this percentage, the better your creditworthiness will be.

Pay your bills quickly

Paying your bills – on time and consistently – is an important step in building or maintaining a good credit score. Late and overdue payments can affect your credit history for years. If paying bills on time is a problem for you, consider setting up automatic payments. If that's not an option, set a reminder on your phone or calendar.

Keep the credit cards you already have …

In general, the longer you have a credit card, the better. Once you've paid the balance, you may be tempted to close your credit card account. Don't do it – unless it has an annual fee. Closing an account can change your credit usage and negatively affect your credit history.

… but don't get new

Stop opening credit accounts while trying to pay off debt. As your credit score improves, you will likely receive more credit card offers. Ignore them – unless there is a balance transfer option with 0% interest, no fees, and a long enough payback period.


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