Credit refers to the ability to borrow money or utilize goods and services without having to pay immediately. For example, a credit card allows you to pay at stores, while a home or car loan will enable you to buy a house or vehicle even if you don’t have the funds. In these cases, you enter into a contractual agreement with a creditor, like a bank: They spot you the money, which you agree to pay back later, along with interest.

Your credit score is a measure of your creditworthiness — basically, how likely you are to promptly and completely pay back the funds you owe a lender (money borrowed plus interest). Your credit score is based on your financial history and encompasses everything from whether you pay your bills on time to if you’ve ever filed for bankruptcy. Lenders look at your credit score when deciding whether to enter into a credit agreement with you and to determine how much credit they are willing to extend to you and at what interest rate.

If you have bad credit, it can be difficult to get a loan or a new credit card. This can get in the way of life goals, like buying a house. The good news is that it’s possible to improve bad credit on your own. The below guide provides a step-by-step process for self credit repair. This will better your overall fiscal health and open up more possibilities for you financially.

Your credit score tells lenders how likely you are to pay back the money you owe them in a timely manner. A credit score is a number from 300 to 850. The higher your score, the better — and the more likely you’ll be able to secure loans and credit cards with larger limits and lower interest rates. The credit score model was established by the Fair Isaac Corporation (FICO). Thus, you may also see credit scores referred to as a FICO Score, as this is the most commonly used system. 

The FICO model categorizes scores into one of five categories. Here is a breakdown:

• Excellent: 800 to 850
• Very Good: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 300 to 579

Three primary credit bureaus in the United States track these credit scores: Experian, TransUnion, and Equifax. These credit reporting agencies report, update, and save consumer credit histories. They rely on five main factors to determine your rating: payment history, the total amount owed, length of credit history, types of credit, and new credit. We’ll discuss each factor, what they mean, and how you can use them to improve your credit score below.

It’s important that you get a full credit report covering all three agencies at least once per year. Why? Some lenders may only report to one agency, not all three. You need data from all three for a full picture of your credit health.

You can improve your credit score. While it takes time and effort, it’s well worth the improved financial security it will bring you. You don’t want bad credit to bar you from taking out a mortgage to buy your dream home, for example, or prevent you from securing a credit card if you need emergency funds. Putting in the effort now to improve your credit score can provide you with peace of mind and will serve you practically for the rest of your life. 

There are a few strategies to improve a credit score. Below, we cover the most impactful steps you can take.

If you’re worried about poor credit, you might put off checking your credit score. Don’t let your worries take over. Knowing your credit score is critical if you’re going to improve it: You have to know your baseline. Your full credit report will also allow you to identify areas in need of improvement, pinpoint potential errors, and find general ways to improve your credit habits. Plus, as you improve your credit score, seeing the positive changes will keep you motivated.

Some people are also scared that the act of requesting their credit report will bring down their credit score. This is a myth. When you request your annual credit report, you submit what’s known as a “soft inquiry,” which won’t hurt your score. What does have the potential to hurt your score is a “hard inquiry.” This occurs when you apply to a lender for credit, and the lender runs a credit check. Since taking on fresh debt may impact your ability to repay existing debts, a hard inquiry can bring down your score — but by no more than about five points, according to FICO.

So, how do you find out your number? According to the Federal Trade Commission’s (FTC) Fair Credit Reporting Act (FCRA), you’re entitled to one free copy of your credit report from each credit bureau every year. There are three ways to obtain your report: online, by phone, or by mail. You can expect your credit report within two to three weeks if you order by phone or mail. If you order online, you will receive immediate access. Here are detailed guidelines for how to request your credit report: 

• Online: You can access your free credit report through AnnualCreditReport.com — the three credit bureaus jointly maintain this portal. Simply click “Request Your Free Credit Reports” and follow the steps provided.
• Phone: To order by phone, call 1-877-322-8228. Be prepared to go through a verification process. If you have accessibility needs (e.g., require a Braille or large-print version of your report), call 1-800-821-7232.
• Mail: To request your annual credit report by mail, download and print the credit report request form via AnnualCreditReport.com. You will need a PDF reader like Adobe to view the form. You can then complete the paperwork and send it to this address: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348-5281.

Again, you can request one free credit report per year without financial penalties. In addition, Equifax offers six free reports per year if you sign up for a myEquifax account. However, remember that you need a full credit report covering data from all three credit agencies at least once per year.

Your credit report will provide basic personal information, a detailed history of all your accounts, and a list of all publicly listed financial records, like bankruptcy filings. It will also provide a history of credit report inquiries (by yourself and lenders). Five main factors impact your credit score. Keep these in mind as you read through your credit report so that you can identify areas of improvement:

• Payment history: Payment history comprises 35% of your total credit score. It indicates whether you pay your financial obligations on time. This could include utility bills, credit cards, loans, store credit cards, and even rent.
• The total amount owed: This accounts for 30% of your total credit score. It primarily looks at credit utilization — which refers to the percentage of available credit that you use. Say you have a credit card with a $10,000 limit and are currently using $4,000 of that line of credit. Your credit utilization is 40%.
• Length of credit history: This accounts for 15% of your total credit score. People with a longer credit history are deemed less risky by lenders. They’ve proven that they can manage their finances and pay back debts on time. People with little or no credit history are deemed riskier due to the lack of data available.
• Types of credit: The type of credit you use accounts for 10% of your total credit score. There is installment credit and revolving credit. Installment credit encompasses loans like mortgages, student loans, private personal loans, and car loans. Revolving credit includes credit cards and lines of credit (e.g., store credit). Installment credit basically involves a lump sum borrowed, while revolving credit is continually renewed as you pay the debt.
• New credit: New credit accounts for 10% of your total credit score. This includes how long ago your last account was opened and how many accounts you’ve recently applied to open. Someone who suddenly opens a lot of accounts might be a red flag, as this could indicate they’re preparing to take on a lot of different debts, which might impact payment ability.

Check your credit report thoroughly for errors. Mistakes in credit reports are more common than you might think: According to the FTC, more than 1 in 5 people have an erroneous negative item in their credit report that makes them look riskier as a borrower to credit issuers than they actually are. Here are some of the types of mistakes you may find: 

• A bank account you’ve closed is reported as being open.
• You’re listed as an account owner when you’re just an authorized user.
• The same debt is listed multiple times.
• There are incorrect payment dates.
• There are balance errors (e.g., incorrect credit limit or balance).

If you find an error, you should dispute it with the relevant lenders and the major credit bureaus: Experian, TransUnion, and Equifax. Your credit report should provide details on how to carry out a dispute. This can be done online or via mail. If you send your dispute letter by mail, do it via certified mail and request a return receipt, which can prove when you mailed. Why does this matter? Credit bureaus are given a maximum of 30 to 45 days to investigate and reply to your dispute. You want to hold them to this deadline.

To dispute an issue in your credit report, you’ll have to include a copy of the report with the disputed point highlighted, along with a copy of any proof you have to support your claim. For example, if an account you closed is listed as open, you might include the notification from the bank confirming that the account has been closed. Always provide a copy of such paperwork, not the original, if sending by mail. You don’t want to risk losing the originals of such important documents.

If you have past due accounts listed on your credit report, tackle these as soon as possible. Remember, payment history is a big portion of your score (35%), so fixing these issues is a critical step toward a higher credit score. If you can’t pay off the overdue balance in full, contact the creditor to figure out a new payment plan or terms that fit your financial budget.

Also, prioritize settling any charge-offs, which occur once payment is at least 120 days overdue. Charge-offs are very damaging to your credit report. If possible, pay off the charge-off in full. Your credit report will then show that the account balance is $0 and paid. If this isn’t possible, contact your creditor to figure out a plan. 

Looking at your credit report will also let you see where you can improve your credit habits. Maybe you pay your bills regularly, but you always pay them late, for example. Late payments negatively impact your score. You might choose to set up automated monthly payments to avoid this issue in the future. Here are some good credit habits to adopt:

• Pay all of your bills (at least the minimum amount due) punctually.
• Pay down debt, even if it’s just a little bit every month, especially credit card debt.
• Avoid applying for additional credit.
• Create a budget to help you get your personal finances in order.
• Keep informed on credit card scams and other forms of financial fraud, like identity theft, which can take a toll on your credit. 

Outstanding credit card balances are another factor that can seriously bring down your overall credit score. When you make your budget, allot a set amount to pay off your credit card balance every month. Alternatively, you can enlist the help of a professional company. Note that credit agencies analyze your credit card debt as a ratio of your limit. So, if you have a card with a $1,000 limit and have spent $700, you’ve used 70% of your limit. If your card has a $2,000 limit and you’ve spent $700, you’ve used just 35% (which is better).

While self credit repair is possible, it can be a tedious and time-consuming process. If you’re feeling overwhelmed by the prospect, credit repair companies like Credit Saint can help. Our experts have the knowledge, experience, and resources to handle critical credit builder tasks, such as:

• Analyzing your credit profile to figure out what’s bringing it down
• Disputing incorrect items and negative information in your credit report
• Intervening with creditors who are hassling you
• Sending cease-and-desist letters to creditors
• Tracking your score to stay on top of changes
• Inquiry targeting
• Monitoring

A home warranty, as defined by the Cornell Legal Information Institute, is “a service contract that covers a major housing system–for example, plumbing or electrical wiring–for a set period of time”. These contracts protect home owners from high repair costs. Home warranties cover sudden appliance breakdowns and system failures. These are not covered under an insurance policy. With a home warranty, you’ll be covered if your refrigerator stops running or your plumbing backs up. That saves you money and time. Our service contracts promise fast service for covered issues. They protect for your home, budget, and time. A home warranty covers systems and appliances in the home that suffer from wear and tear. The amount of coverage is chosen by you. You can choose a custom plan that best suits your home. A typical plan covers:

• Heating systems and ducts
• Plumbing systems
• Electrical systems
• Water heaters
• Kitchen appliances, including your oven, range, stove, cook top, dishwasher, and built-in microwave
• Garbage disposal
• Whirlpool bathtub
• Plumbing stoppage
• Garage door opener
• Exhaust fans
• Ceiling fans

If you would like deeper coverage, opt for a more complete plan. A Total Plan from Choice Home Warranty includes all of the above as well as your:

• Air conditioning
• Refrigerator
• Clothes washer
• Clothes dryer

You can adjust your plan to include more coverage. This lets you to build a plan that’s only what you need for your home. Some of the optional items you can cover include:

• Pool and spa
• Central vacuum system
• Well pump
• Roof leaks
• Sump pump
• Septic system and septic tank pumping
• Second refrigerator or a stand-alone freezer

Tailor your warranty to cover the systems that matter most. You may be concerned about the age or safety of any parts of your home. You can build a plan that protects those things. Your system may need broad repairs or to be replaced. Your warranty offers all the coverage you need for the problem. A likely disaster becomes a minor item on your to-do list.