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Why Credit Scores Matter
So, you know what credit scores are, right? If not, let me explain it to you. It’s like a report card for your financial life. The better your score is, the easier it is for you to get credit, loans and may even help you get the power and control over negotiating the best interest rates.
But did you know, many people today don’t realize that even small errors on credit reports can lead to a high-interest rate?
How to Improve Your Credit Score
If you’re thinking about getting a good credit score, the process can be a lot like a diet. Just like how you improve your diet with small changes like replacing your favorite soda with water, you’ll want to make small improvements that lead to a big change. No drastic diets or spending habits are needed, just small, regular efforts to improve your finances. To get started:
- Avoid opening too many credit accounts.
- Pay your bills on time
- Prioritize paying off old debt
- Don’t max out any of your credit cards
- Monitor your credit report for errors or fraud
How to Dispute Any Unwanted Element on Your Credit Report
Did you know that legally, you can dispute any unwanted element on your credit report? So that if you have something on your report that does not belong there — whether it’s an old account that should have been removed from your report, a charge you did not make, or something else entirely, you have the power to remove it. Here’s how to dispute a single item on your credit report:
- Write a dispute letter: Write a letter to each of the credit bureaus that have an error on your credit report. Explain the error and state that you want it removed from your report.
- Provide evidence: Send any evidence or documentation that supports your side of the dispute along with your letter.
- Wait: Credit bureaus have 30 days to investigate your dispute, after which they need to provide their findings to you. If they agree with your dispute, they’ll remove the error from your credit report.
Why Your Credit Score Matters
Your credit score has a huge impact on your life, both financially and mentally. A good score can help you get approved for a loan, higher limits, lower interest rates, and higher credit limits. A bad score may lead you to pay a higher interest rate and create additional problems while getting approved for credit.
Tips to Maintain a Good Credit Score
- Pay your bills on time, without fail.
- Avoid opening too many credit accounts, as each time you open an account, it could be seen as a sign of risk to creditors (even if you don’t use that credit card or loan frequently).
- Don’t max out your credit cards. Set a limit on what you’re willing to spend per month.
- Monitor for errors and fraud in your credit reports.
FAQs
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What’s the difference between a credit report and a credit score?
A credit report is a detailed history of your credit and loan accounts, collections, and financial transactions. Your credit score, on the other hand, is a numerical representation of all that information that summarizes the risk of lending to you.
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How can I get a free credit report?
You’re entitled to one free credit report per year from each of the three major credit reporting agencies, which are Equifax, Experian, and TransUnion. Go to annualcreditreport.com to request a copy of your report.
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How many credit cards should I have?
It’s best to have a few credit cards, at least three – one for everyday spending, one to accumulate rewards, and one as a backup in case the other two are lost or stolen. However, it’s important to only use what you can afford to pay off in full each month.
That’s it, guys. Hope these tips helped you understand and improve your credit scores!
Zhang Quan is Minted millennial Writer and Editor.