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Cleaning Up Your Credit

Things you can do to keep your credit in great shape.

Your friends at TFS want you to live your best financial life. An important part of your overall financial well-being is how you manage credit. But what does that really mean? This page breaks it out for you, but we also wanted to share some additional tidbits below.

First things first. Your credit score is a three-digit number, ranging from 300 (very poor) to 850 (excellent), determined mainly by the results of credit reports, which come from credit bureaus. Your credit score determines the interest rates you pay when you borrow, so it’s important to keep your credit in great shape.

If you’ve done your homework and learned that your credit score is low, don’t despair. Take action.  

  1. Pull your credit reports. There are three main credit-reporting bureaus: Equifax, Experian, and TransUnion. Thanks to the Fair Credit Reporting Act, a person can pull one credit report per year at no cost. Another way to keep track is to subscribe to a credit monitoring service, which sends you an update each month.
  2. Carefully look over your report. Scan for things like bank accounts that you don’t own, make sure your payment histories and balances are correct and check that your personal information is correct. Errors like a wrong address or an incorrect birth date could be signs of identity theft. 
  3. If you find an error, dispute it by filing a formal complaint with the credit bureau. This can be done online by following the steps on each bureau’s website.
  4. If you have a past-due account listed on your report, it may be possible to get the creditor to remove it. This usually only works if you were late just one time after a long history of on-time payments and have made your payments as scheduled since. The creditor is also under no obligation to do this for you, but some will if you’ve been a good customer and ask nicely.
  5. Reduce your credit card debt. Your credit utilization ratio is how much credit you’re using compared to what your card limits are. The lower this ratio, the better. Aim for carrying a balance of no more than 30% of your limit. A high credit utilization ratio makes you a bigger credit risk and lowers your credit score. Paying down your credit cards is the fastest way to improve your credit score.

When your personal credit is in great shape, your financial options increase and so does your peace of mind. Once your credit is in a good place, keep it that way by using our handy checklist. Achieving and maintaining good credit takes patience and persistence, but in the end it’s well worth it.

Information is not intended to provide financial, legal, or tax advice. Always consult the appropriate professional for your specific situation.

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