A quick guide on how to fix your credit

If you're like many consumers across the country, the current economy has probably motivated you to reexamine your finances. You may be considering ways to save money, like cutting spending on entertainment or vacations, or budgeting on essentials like groceries and gas. Or perhaps you're reconsidering the timing of purchasing big-ticket items like a vehicle or home. You may also be part of a growing number of consumers who are looking to improve their financial situation by dealing with their credit score.

Facing the realities of having poor credit can be overwhelming and stressful for anyone. But even if your credit score has been negatively affected by activities like missed mortgage or car payments, or even a bankruptcy or lawsuit, there are still steps you can take improve your credit and regain your financial footing. Here are some tips on repairing your bad credit and improving your credit reports.

Improve your credit utilization ratio

One way to improve your credit score and your credit report is to maintain a low credit utilization ratio.

Credit utilization ratio, also known as a balance-to-limit ratio, is an important percentage used in the calculation of credit scores. The figure represents the percentage of credit limit that is used compared to the total amount available. If you have a low ratio, then you have more available credit than you have debt, which will be reflected positively in your credit score. In contrast, the opposite is also true. Maxing out your credit cards or keeping your account balances close to their available limits will reflect poorly on your credit.

Your credit utilization ratio is also considered more significant than the total amount of available credit on your accounts. Experts recommend consumers keep their account balances at less than 25% of their available credit.

Lowering your credit utilization ratio can make you appear lower risk to lenders, and is also be a vital tool that can help repair your credit.

Dispute inaccurate information in your credit reports

Another tip that can help improve your credit is to notify the credit bureaus of any errors in your credit report. Whether the incorrect information is due to an accounting or clerical mistake, or a misunderstanding with a business or lender, errors on your credit report can have a negative impact on your credit.

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