Repairing Your Credit After a Tough Year

One thing that we can probably all agree on is that 2020 has been a challenging year. The pandemic has upended the lives of millions of Americans. High unemployment has characterized the last few months, and many people are having trouble keeping up with their monthly expenses. Unfortunately, this can negatively affect your credit score and make it harder to buy a home in the future. However, there are things you can do to repair your credit after a tough year. Here’s what you need to know to get back on track.

Order your credit report

The first thing you need to do if you’re worried about your credit is to order a free copy of your credit report. You can’t fix a problem if you don’t know what you’re dealing with. Your credit report will show you what is negatively impacting your score. This will inform you about what to focus on and how to strategize your comeback.

Start making on-time payments

Are late payments dragging down your score? Your payment history is one of the biggest factors that determine your credit score. Late payments can stay on your report and influence your score for up to seven years. They also cause you to spend extra money on fees. If you have a tendency to forget to make payments on time, then set up automatic payments. If you’re having trouble making ends meet, then find ways to reduce your discretionary spending, like eliminating take-out meals or impulsive late-night online purchases.

Don’t take on new debt

It can be tempting to take on new debt in order to get you through hard times. But if you’re trying to repair your credit, then avoid new lines of credit. Your credit utilization ratio is another big factor that influences your score. It’s how much credit you use in relation to your available credit. The only kind of new debt you should consider is a debt consolidation loan to help pay off and eliminate old debts.

Call your lenders

Did you know you can get a lower interest rate simply by asking for it? Although you’re not guaranteed a lower rate, you should call your lenders to ask for one. The worst they can say is no. While you’re talking with them, find out if there are any deferment plans available. Because of the pandemic, many lenders are willing to work with their clients. You may be able to put off making payments for a few months without it being reported to the credit bureaus.

Keep paid-off accounts open

Have you successfully paid off some of your accounts? Congratulations! That’s a huge step forward. But don’t be tempted to close those accounts just yet. Your credit history also affects your score, so keep paid-off accounts open. Just remember to make small purchases to keep them active and pay them off every month.

Contact the Clark & Gilman Team

Repairing your credit will help to ensure that you qualify for a home loan and get the best interest rates possible. When you’re ready to buy a North County San Diego home, contact the experts at the Cristine Clark & Jamie Gilman Team at 760-758-1211 or [email protected]. Here’s to a better 2021!

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