At Credit Diva of Dallas, we know that going into the new year with credit issues is always disheartening. If there’s one common resolution made at the start of the year, it’s to pay down debt or resolve problematic credit.
Credit problems can arise for a variety of reasons.
- Maybe a divorce added to your financial woes.
- Perhaps you're overwhelmed by college debt.
- Possibly, you got hit with a large car repair bill.
- Medical debt is another serious problem.
Whatever the case may be, when your credit score takes a hit, your entire future hangs in the balance.
A strong credit portfolio is critical to get the best lending rates and have genuine purchasing power. So, what should you do if your credit is suffering? Here are three ways you can start fixing your credit right now in the new year with tips from your Credit Divas!
Check Your Credit Report
- You may wonder how checking your credit report can help.
- You may already know your credit is in trouble.
- However, you may not know why your credit is damaged!
There could be some errors on your report that, if remedied, would boost your score. For example, there could be duplicate accounts, fraud, incorrect information, and many more issues dragging down an otherwise great credit score. If these issues are corrected, it will help your credit bounce up.
Checking your credit means pulling reports from all three credit reporting bureaus, which are as follows:
Once you have the information pulled, you need to carefully comb through all the accounts to ensure that everything is correct. This can be a tedious and stressful task unless you have a credit repair company like Credit Diva of Dallas working alongside you! Don't be afraid to reach out and ask your Divas for credit help.
Start Paying Down Revolving Balances
As the credit debt piles up, your score can tend to trend down. Why does that happen? A major factor has to do with your credit utilization ratio. You’ve probably heard this term used before—but maybe you’re not sure how it affects your score.
- Your credit utilization ratio is how much you currently owe divided by your credit limit.
- In other words, it is the amount of revolving credit you're using divided by the total amount of revolving credit you have.
- Lenders don’t like to see a high credit utilization ratio. The ratio needs to stay below 30%.
- If you start paying down your revolving balances, you will naturally reduce the credit utilization ratio.
Don't Open or Close Any Accounts
There are different reasons for both of these actions being a bad idea when trying to fix your credit.
- Some people assume that closing an old account they don’t use will help them because it’s like 'cleaning up clutter.' However, it doesn’t work that way with revolving credit.
- When you close an account, it makes your total available credit balance lower, which means your credit utilization ratio will automatically drop.
- Leaving all your accounts open—whether you use them or not—is best to maintain a higher available credit.
When you open a new credit account, the lender must make a hard inquiry on your credit. This is different from a soft inquiry, which is used for preapproval offers or employment checks.
Soft inquiries don’t hurt your credit score—but a hard inquiry does. If you open a new account, the creditor makes a hard inquiry on your credit, and that can lower your score by a few points.
Next Steps
Take the next step in repairing your credit for good by hiring a professional to manage the repair process. Credit Diva of Dallas will help you get your credit back in excellent shape this year! Get in touch for more information about our specials.
