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According to a credit repair Dallas company, having good credit is vital to having a healthy financial life, and it allows you to do many of the things you want to do, such as purchase a car, a home, or make home improvements. However, many people don’t know how credit works or what constitutes good credit, which is why they get into trouble.
In this article, we look at what most homeowners don’t know about credit and what they can do to fix it.
How To Establish Good Credit
While it’s common knowledge good credit is essential to your financial health and to give you the ability to borrow money; most people don’t know how to get good credit or fix theirs if it’s not where they want it to be.
Many people believe income is the number one factor that determines your FICO or credit score, and by making more money, your score increases. However, the truth is your FICO score is based on five factors:
- How much money you owe
- Your payment history
- The types of credit you have, such as loans and credit cards
- The length of your credit history
- The number of credit accounts you’ve opened
To establish good credit, one must take into account these five factors as opposed to just trying to earn more money.
How To Check Your Credit
Another thing many people don’t know when it comes to credit is how to check their score. Too many people believe this information is hidden away or can only be gotten by an FOIA request when nothing could be further from the truth.
Getting your credit score is easy; you can get a copy of your credit score and report for free via various websites or apps you can download to your smartphone.
How To Improve Your Score
If you’re a homeowner and need to make repairs or want to make a large purchase, you may find you can’t do that because you can’t get the credit you need. Knowing your score is essential because it tells you how lenders view your creditworthiness and what you can do to improve. Sadly, many people don’t know how to improve their credit when it’s quite simple.
The first step is to find out where you stand, which you can do by getting a copy of your credit report. If your score isn’t so hot, you can improve it quickly by making all of your future payments on time. Missing payments is the quickest way to drag your credit score down.
The next way to improve your score is to pay down debts quickly, and that often means paying more than the minimum every month.
You Have More Than One Credit Score
While most people think of their FICO score when they think of their credit score, the fact is there are three nationwide credit reporting companies — Equifax, Experian, and TransUnion and all may have different information regarding your credit, which is why it’s essential to get all of your reports and check them for accuracy.
You Can Dispute Inaccuracies
Too many people accept whatever credit score they’re presented with by a credit reporting agency, but sometimes, these companies make mistakes or have incorrect information that negatively affects your credit score. Most people assume the score is set, and there’s nothing that can be done. However, if you thoroughly check your credit report, and find an inaccuracy, you can dispute it.
If you’re a homeowner and want to ensure your credit is sound, so you have borrowing power, remember these points about credit and make sure you get updated every time your credit score changes so you can make sure you’re headed in the right direction.