fix your credit

How to Fix Your Credit: A Key to Financial Freedom

fix your credit

When you fix your credit, you are one step closer to financial freedom. But, how do you do this?

Credit comes with its many benefits and of course its negatives. It takes careful, responsible spending and timely repayments in order to really see its positives and not experience its dark side.

Those in need of repairing their credit know how difficult it is to be approved for loans, receiving lower rates and getting ahead. But, there is good news. You still have hope and can fix your credit.

Fixing your credit can help you get closer to financial freedom. Here are some great tips to help you get started:

Don’t stop believing

Continuing with credit seems counter-intuitive, but using credit is a great way to achieve a good score. As long as you pay them back immediately, do use your credit cards. You also want to mix up the type of credit you use (i.e. installment accounts such as mortgages and revolving accounts such as lines of credit). Don’t wait to repay; not only does this harm your finances due to interest rates, but it hurts your score as well. Your payment history is one of the key factors of determining your credit score. You want to make sure you can prove to credit card companies you’re capable of timely repayment in order to improve your rating.

Open a savings account

Opening a savings accounts helps to reach a favorable credit rating. As simple as it may sound, this does show companies that you are financially responsible and have the resources to pay for debts.

Spread out your disputes

You can dispute items from your credit reports. If you do, however, just be sure to spread them out and do one item at a time, starting with the most damaging or largest items first. Disputing too many things at once signals a red flag to the credit bureau, and they could consider them to be insignificant. Make sure to really take time to examine your report.

Keep balances low

This one is pretty simple. Just because you have a $5,000 limit each month does not mean you should reach or max it. Keep your balances low so that they are easier to handle.

Get your monthly report

Tracking your monthly activity with your credit is just as important as tracking your other expenses each month. If something seems off, you will be able to dispute it right away. This is a good habit to develop. It will be a cost to get them monthly, but it will be worth it to keep you on a favorable path. To ensure your report and activities are current across the three major credit bureaus, retrieve reports from Equifax, TransUnion and Experian yearly. Not to mention, you’re able to get one free report from each bureau each year under the Fair Credit Reporting Act, making the cost of credit maintenance low.

Don’t create more debt

If you’ve put yourself in a bad situation with your existing debt, you generally should avoid opening more credit cards or loans to pay off what you have. This can really cause the problem to continue to spiral out of control. Instead, you need to start focusing on ways to reduce this debt in order to fix your credit. On the contrary, there may be times where it is OK to open another credit card in order to generate some positive credit history. A secured credit card, which requires a deposit that serves as your limit, could be the answer for you in those sticky situations. Just don’t sign up for unnecessary credit cards.

Know that this process will take time and dedication before you start to see improvement. There will be a many ups and downs on the road to credit repair, but try not to get discouraged. Make it a priority so that you can work toward that financial freedom you’ve been dreaming about for a while now. If you feel overwhelmed by the process, just take things one step at a time. Create better spending habits in order to ensure you are not in a situation like this in the future.

What steps are you taking to fix your credit? What route has worked best for you?