In today’s financial landscape, maintaining a good credit score is crucial for securing loans, mortgages, and favorable interest rates. For those struggling with credit issues, Lexington Law offers professional credit repair services designed to help improve your credit score. This article explores how Lexington Law can assist you in achieving a better credit score and the benefits of its services.
Introduction
Credit scores play a vital role in financial health, influencing everything from loan approvals to interest rates. However, maintaining a high credit score can be challenging due to various factors such as missed payments, high debt levels, or inaccuracies in credit reports. Lexington Law, a leader in credit repair services, provides a comprehensive approach to improving credit scores. This article will delve into the ways Lexington Law can help you boost your credit score and secure a brighter financial future.
Understanding Credit Scores
Before exploring how Lexington Law can assist you, it’s essential to understand what a credit score is and how it impacts your financial life.
What Is a Credit Score?
A credit score is a three-digit number that rates your creditworthiness. Typically ranging from 300 to 850, a higher score indicates a greater likelihood of being approved for loans and securing better interest rates. FICO scores, created by the Fair Isaac Corporation, are the most commonly used, alongside VantageScores.
A credit score is based on your credit history, which includes information such as the number of accounts, total levels of debt, repayment history, and other factors. Lenders use credit scores to evaluate your creditworthiness or the likelihood that you will repay loans on time.
There are three major credit bureaus in the U.S.: Equifax, Experian, and TransUnion. This trio dominates the market for collecting, analyzing, and disbursing information about consumers in the credit markets. Each bureau maintains a credit report for you, which serves as the basis for calculating your credit score.
Importance of a Good Credit Score
A good credit score is essential for financial stability and offers numerous benefits, including:
- Loan Approvals: Higher credit scores increase the likelihood of loan approvals.
- Interest Rates: Better credit scores often lead to lower interest rates on loans and credit cards.
- Financial Opportunities: A good credit score can open doors to various financial opportunities, including better insurance rates and rental agreements.
10 Ways to Improve Your Credit Score
1. Check Your Current Score
Before starting to work on improving your score, it’s helpful to know where you currently stand. You can check your credit score for free using your bank or credit card statement, or online services like Credit.com. Obtain your credit reports from the three major bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. Knowing whether your score is in the good range or needs improvement is the first step.
2. Understand the Factors That Affect Your Score
To make meaningful progress in improving your score, you must understand how it’s calculated in the first place. The five factors that impact your credit score are:
- Payment History (35%): Consistent, on-time payments are crucial.
- Credit Utilization (30%): Aim to keep your credit usage below 30% of your available limit.
- Length of Credit History (15%): A longer history positively impacts your score.
- Inquiries and New Credit (10%): Limit new credit applications to avoid hard inquiries.
- Credit Mix (10%): A diverse mix of credit types can boost your score.
3. Make On-Time Payments
Since payment history is the most significant scoring factor, it makes sense to prioritize on-time payments when you’re looking to get a better score. Lenders want to see a pattern of consistent payments because this means that you’ll likely pay back your debts if they extend new credit to you. On the other hand, even a single late payment can harm your score.
Missed payments can remain on your credit report for seven years. It’s important to catch up on any outstanding bills as soon as possible. Even though late payments remain on your report for seven years, the impact of these negative items lessens over time compared to more recent ones.
Significantly overdue payments could be sent to collections. An overdue bill that has been sent to a collection agency will likely lead to a large drop in your credit score. If you do have an account in collections, it can remain on your credit report for up to seven years—and even paying off the account won’t remove it from your credit report.
Consider contacting your creditors if you know you’ll have trouble making a payment. They may forgive a single late payment if it’s your first one, or if you otherwise have a positive history with the creditor. The worst they can do is say no, so it doesn’t hurt to try. You can also ask about creating a payment plan if that will lessen the burden of paying a bill in full.
Once you’ve committed to making on-time payments every month, take some time to figure out the best strategy for you. Some people prefer to use autopay to ensure that payments are made on time, while others make it a habit to review all of their credit accounts once a week to stay on top of new statements or bills. Many credit card and loan companies also offer complimentary payment reminders by email or text message to help you manage payments among multiple accounts.
4. Keep Credit Utilization Down
The second most important factor in your score is credit utilization, which is simply the amount of credit you’re currently using compared to the total credit you have available. In general, having a credit utilization ratio below 30 percent is optimal for maintaining a high credit score.
Essentially, you’ll want to add up the balances of all of your credit cards, and then add up the credit limits across all of your cards. After dividing your total balances by your total limit and multiplying by 100, you’ll know how much of your total available credit you’re currently using.
Keeping a lower credit utilization lets lenders know that you’re able to manage your finances without leaning too heavily on your credit cards. As a result, keeping your utilization down will likely raise your score and make it easier to get new credit in the future.
Note that your end-of-statement balances are determined by when your credit card provider chooses to report to the credit bureaus. Some people choose to make small payments on their credit card bills throughout the month, and others make sure to pay their full balance before the statement is generated. In either case, if you time it right, you may be able to have a lower balance reported to the credit bureaus, which will also decrease your utilization.
5. Keep Your Old Credit Cards Open
While it may seem counterintuitive, keeping old credit cards that you’re no longer using open could help both your credit history and your utilization.
Even unused cards factor into your length of credit history. If you have an older card that you don’t use anymore, it will still make your credit history longer and increase the average age of your credit accounts. Since length of credit history makes up 15 percent of your score, having older accounts generally has a positive effect on your credit.
Keeping an old credit card open maintains your total credit limit. If you close an older card, you’ll lose the credit limit associated with it. In turn, you may see a higher credit utilization percentage, since your balances will remain the same but your total credit limit will decrease. Since credit utilization makes up 30 percent of your score, it’s often wise to keep an older card even if you don’t need it.
Overall, keeping older credit cards around helps you maintain your credit score, but there are reasons you may want to close an account. For example, if an unused card has an annual fee, you could consider closing it. If you do that, however, first see if the credit card provider will waive the annual fee or transfer your credit limit to another card without a fee.
If you want to keep your old credit cards open, you’ll need to make occasional transactions on each card or they may be closed. Many people choose to put small recurring transactions, like a streaming service subscription, on older credit cards. If you do this, consider setting your card’s statement to autopay so that you don’t accidentally miss a payment.
6. Apply for New Credit Only When Needed
Another factor in your credit score is new credit, which represents how often you’re applying for and opening new accounts, like loans or credit cards. Most people need new credit now and then, but opening too many new accounts in a short time can decrease your score.
Here’s how opening new accounts can hurt your credit score:
- Adding too many hard inquiries: Your credit report notes a hard inquiry when a lender reviews your credit file after you apply for new credit. Too many hard inquiries can raise red flags with lenders, who could worry that you’re relying too heavily on credit to manage your finances. Hard inquiries stay on your report for two years, but they generally only really affect your credit score for the first 12 months after they’re initiated.
- Lowering your credit age: Remember that the length of your credit history makes up 15 percent of your score. The more new credit cards or lines of credit you open, the lower your overall credit age will be. This is why it’s important to proceed with caution and assess all possible effects that applying for a new credit account could have on your score.
- Increasing temptation to spend: Seeing a new credit account with a fresh balance can make it difficult to fend off the temptation to spend, potentially leading you to accumulate more credit card debt. If you don’t already have a handle on your spending habits, opening new credit accounts probably won’t be the best strategy when trying to improve your credit score.
Opening new credit accounts is occasionally required—like when you’re obtaining a mortgage or getting an auto loan. That said, new accounts can lead to a temporary dip in your score, so you’ll want to be mindful to only apply for accounts that you need. That way you’ll be able to build up healthy credit that will be there when you need it.
7. Build or Rebuild Your Credit History
If you currently have a low credit score, it can feel difficult to break the cycle of bad credit and increase your score. However, there are excellent options for people with no credit or a poor credit history to start making progress toward a higher score. Consider getting a secured credit card, opening a credit builder loan, or becoming an authorized user on a credit card to improve your score.
Here’s a bit more information about each of these methods of building or rebuilding your credit.
- Secured credit cards require you to put down a cash deposit, which acts as the balance available on the card. People with no credit score or a poor credit score can get these cards because they present little risk to lenders, since late or missing payments are covered by the cash deposit. Meanwhile, they can help increase your credit score as on-time payments help build up your payment history.
- Authorized users on a credit card have the card’s credit history on their credit reports. A trusted family member or a spouse can add you to their credit card, helping you improve your credit history while also gaining access to a line of credit.
- Credit builder loans are another kind of credit tailored to people aiming to build or rebuild their credit. Each month, you’ll deposit into a secured account, and when the loan is fully paid off, you’ll receive the full balance back. By making consistent on-time payments, you can use this kind of loan to help increase your score.
Having low credit can feel overwhelming, but the financial tools listed above can help anyone rebuild their credit and get back on the path toward a high credit score.
8. Send a Pay-for-Delete Letter
As you know, negative items like late payments and collection accounts can continue to affect your score for many years. Even paying off an account in collections is unlikely to have an immediate effect on your credit score, since the account may continue to be listed on your credit report for up to seven years.
However, some creditors will negotiate if you send a pay-for-delete letter. With this letter, you agree to pay the full amount of your debt in exchange for having the negative item removed from your credit report.
If the creditor agrees to the terms of the pay-for-delete letter in writing, you may be able to pay off the balance of your debt and have a negative item removed from your report, likely leading to a score increase. Keep in mind that not all creditors accept this type of arrangement, so it’s not a guaranteed fix.
9. Include Utility Payments in Your Credit
Typically, only things like loans and credit cards impact your credit score. Today, there are new ways to factor things like rent and utility payments into your credit. If you know you make these types of payments on time, it’s a great way to raise your credit score.
For example, Lexington Law offers a service that allows individuals to have rent, utility, and cell phone payments reported to at least one of the three credit bureaus. This can help you with your credit if you need a little boost.
10. Challenge Inaccuracies on Your Credit Report
Your credit report is the ultimate authority for lenders looking for insight into your accounts, balances, and payment history. That said, credit reports can contain inaccurate information, and those errors could lower your score for no good reason. Fortunately, there’s a process in place for you to challenge any mistakes on your credit report, potentially leading to improved credit.
Once you’ve obtained a credit report from all three bureaus, you’ll want to look closely at your accounts and balances to make sure they match your records. Note that balances may not always be current since they’re reported to the credit bureaus on a set schedule. However, if you don’t recognize an account, it’s worth looking into.
Here are some errors to look out for on your credit report:
- Unrecognized, inaccurate, duplicate, or missing accounts
- “Closed by grantor” notations that report credit cards closed by a provider
- Incorrect public records or inquiries
Any of these errors could be affecting your score, and all of them could be challenged if you were to provide evidence to the credit bureaus showing that the information is inaccurate.
The dispute process involves reaching out to each credit bureau online or by mail. For more details about the process, read our in-depth guide covering how to dispute an item on your credit report.
If you want the support of a trained team to file a dispute with the credit bureaus, consider reaching out to Lexington Law Firm, which could assist you with addressing inaccurate negative items on your credit report.
How to Improve Your Credit Score Using Lexington Law
Improving your credit score can seem like a daunting task, but with the assistance of Lexington Law, you can take significant steps toward a better financial future. Here’s how Lexington Law can help you improve your credit score effectively:
Comprehensive Credit Report Analysis
The first step in improving your credit score is understanding where you currently stand. Lexington Law conducts a thorough analysis of your credit reports from the three major credit bureaus—Equifax, Experian, and TransUnion. This detailed review identifies any negative items, inaccuracies, or unfair entries that may be affecting your score. By providing itemized reports, Lexington Law helps you understand the specific issues that need to be addressed, forming the basis of a targeted credit repair strategy.
Customized Credit Repair Plan
Based on the initial analysis, Lexington Law creates a personalized credit repair plan tailored to your unique financial situation. This plan outlines the specific steps needed to address the negative items on your credit report. The customized approach ensures that your credit repair efforts are focused and effective, addressing the most significant factors impacting your score.
Dispute and Challenge Process
One of the core services provided by Lexington Law is handling credit disputes. They draft and send dispute letters to the credit bureaus on your behalf, challenging any inaccuracies or unfair negative items. Leveraging its legal expertise, Lexington Law effectively disputes erroneous entries such as late payments, collections, and other discrepancies that can harm your credit score. If the creditors and credit bureaus cannot provide evidence that the items in question are fair and accurate, they are legally required to remove them from your report.
Continuous Credit Monitoring
Improving your credit score is not a one-time effort; it requires ongoing attention and management. Lexington Law offers continuous credit monitoring services to keep an eye on your credit status. They provide alerts for significant changes in your credit reports, ensuring that you are always informed about your credit situation. This proactive approach helps in maintaining and enhancing your credit score over time, allowing you to address any new issues promptly.
Identity Theft Protection
Identity theft can severely damage your credit score and overall financial health. Lexington Law offers robust identity theft protection services to safeguard against such incidents. They provide coverage to prevent potential damage to your credit and assist in the recovery process if your identity is compromised. This added layer of protection ensures that your credit repair efforts are not derailed by unforeseen identity theft incidents.
Credit Counseling and Education
Lexington Law places a strong emphasis on credit education and counseling. They offer personalized credit counseling sessions to address your specific financial concerns and provide practical advice on managing and reducing debt. Through their online portal, Lexington Law provides access to educational resources that help you develop wise credit habits. Understanding the factors that impact your credit score and learning how to manage your finances effectively are crucial components of improving and maintaining a good credit score.
Building Positive Credit History
In addition to removing negative items, Lexington Law helps you build a positive credit history. This includes guidance on how to use credit responsibly, such as maintaining low credit utilization ratios and making on-time payments. By focusing on building a positive credit history, you can further improve your credit score and demonstrate to lenders that you are a reliable borrower.
How Lexington Law Works
Lexington Law uses a proven process to help clients work to repair any inaccurate and unfair negative items—such as late payments or collections—that are wrongfully hurting their credit reports. Here’s how their services work:
Step One: Reviewing Your Case
When clients sign up for Lexington Law’s services, the process begins by pulling their credit reports. Clients will need to log into their accounts and answer some questions about the items on their report so the team can decide how best to handle their credit repair needs.
Lexington Law aims to identify which items are unfair, unsubstantiated, or inaccurate. The team will investigate whether all relevant laws have been followed and whether all information is being reported accurately. These items could be wrongfully hurting the client’s credit. If necessary, a paralegal will reach out to gather more information.
Step Two: Sending Challenges and Disputes
After working with clients to identify which negative items on their report can and should be addressed, the team at Lexington Law will send challenges and disputes on their behalf. If creditors and the credit bureaus cannot provide evidence that the items in question are fair and accurate, they are legally required to remove them.
Throughout this process, clients can check the status of their cases through their online client portal. Additionally, Lexington Law offers an app for both Apple and Android users to make this process even more convenient.
Step Three: Continuous Monitoring of Credit
As Lexington Law systematically addresses each questionable negative item on clients’ reports, the team will also help monitor and manage their credit. They notify clients of any new negative items that need to be addressed and provide credit education opportunities to help develop wise credit habits. Lexington Law offers credit score analyses and mentoring through its online portal.
Conclusion
Improving your credit score is crucial for achieving financial stability and accessing better financial opportunities. Lexington Law provides expert credit repair services that can help you navigate the complexities of credit reports and disputes. By leveraging their expertise, you can take significant steps toward a better credit score and a brighter financial future.
For those struggling with credit issues, Lexington Law offers a comprehensive and effective solution. From initial consultations and personalized plans to continuous monitoring and credit education, Lexington Law stands out as a leader in the credit repair industry. By choosing Lexington Law, you can confidently work towards improving your credit score and securing the financial opportunities you deserve.