There are so many things you can do with good credit. After all, lenders, businesses, landlords, and employers are all likely to review your credit report.

For lenders, your credit profile helps gauge how likely you are to repay a debt. Lenders use different algorithms to determine a borrower’s risk, but ultimately, a better credit report with a favorable credit score will lead to competitive pricing and offers. Qualifying for a mortgage, purchasing a vehicle, receiving a credit card, getting an apartment, and even landing some jobs can depend on your credit history.

If your credit has seen better days, or if you want more favorable credit terms, there are steps you can take to improve both your creditworthiness and credit score. Even if you have a mostly positive credit history, being proactive and taking steps now could help you qualify for even better offers and opportunities

1. Get a copy of your free credit report.

As you begin to build or repair your credit, start by reviewing your credit report. Even if you have a limited credit history or think there’s nothing on your report, it’s best to check it regularly. You can review your report with all three major credit bureaus—Experian, TransUnion, and Equifax—for free at www.annualcreditreport.com/. Everyone is entitled to one free copy of their credit report each year from each of the three major credit bureaus.

Even though you may not find the same information—or credit score—on each report, each can provide valuable information. Not every lender reports to each of the credit bureaus, and you may need to check all three to get a complete view of your credit profile.

2. Check your report for errors.

Even with increases in automation, there is still room for error. If a mistake lands on your credit report, it can damage your credit. Some credit reporting errors can even be a sign of fraud. It’s a good idea to set aside some time to review your credit report for errors and fraud. You’ll want to look for items like:

• Incorrect information (name, phone number, address)
• Incorrect balance or credit limit information
• Accounts you don’t recognize
• Closed accounts that appear as open
• Open accounts that appear as closed
• You are listed as the opener of an account when you are the authorizer
• Foreclosures, bankruptcies, and other public information that appears incorrect
• Illegitimate reports of late payments or delinquencies
• Missing accounts
• Duplicate listing of debts (possibly under different names)
• Unauthorized inquiries

Even simple errors could harm your credit and make it more challenging to get a loan approval. By staying up-to-date on your credit report, you’ll be able to find these mistakes more quickly and address them.

3. Correct errors.

Each of the three credit reporting bureaus—Experian, TransUnion, and Equifax—is legally obligated to attempt to resolve the errors you report. You’ll need to contact the credit bureau directly to file a free dispute. You can do so online, over the phone, or by mail.

Before you contact the respective agency, be sure to gather the documentation you’ll need, which includes:

• Proof of your identity
• Details of the erroneous information
• Documentation that supports your claim

Your proof might be a closing statement from a credit card company, bank statements proving a payment, or official court documents. Here’s a step-by-step guide walking you through the process of reporting errors on your credit report.

4. Bring all accounts current.

Among the fundamental things that help your credit score, paying past-due bills should be one of your first priorities. Delinquent accounts raise red flags for lenders. Any past due accounts or previously missed payments can influence how lenders view your creditworthiness. Unless an account is 30 days past its due date, the credit bureaus don’t consider it late—so if you’ve missed a payment, catch up as quickly as possible. The longer an account goes unpaid, the larger the impact on your credit.

Once 30 days pass, lenders and other creditors will typically report the account as late to the credit bureaus. Some lenders may not report an account as delinquent until a payment is 60 days overdue―your lenders can provide you with more information on their respective policies.

5. Take action before going to collections.

Payments that are 180 days or more past due can be “charged off” by your creditor. Charge-offs may happen sooner in some instances, including bankruptcy filings or the death of the borrower. A charge-off means that you’ll no longer be able to make regular payments to your lender. The entire amount will become due, and you may incur additional fees for each month that the debt remains unpaid.

Once a lender exhausts all efforts to collect a past-due debt, they may sell your debt or assign it to a collection agency to attempt to collect the debt. When this occurs, your account is closed with the original lender, and a new account may be opened with the collection agency. Having a debt sent to collections can have a lasting negative impact on your credit. Working directly with your original lender to determine an acceptable way to repay your debt obligations is in your best interest. At least take the time to work with your lender to see if you can prevent the debt from going to collections.

An account that goes to collections can remain on your credit report for up to seven years from the delinquency date with your original lender—but the statute of limitations on debt collection can vary from state to state. Learn more about the regulations in Oregon and Washington.

6. Make on-time payments.

A valuable way to establish favorable credit history is to make payments on time consistently. By doing so, you are showing both your current creditors and any potential lenders that you can manage debt responsibly. Setting up automatic monthly payments can ensure you never miss a bill. However, if you’re unsure about using auto-pay, you can also schedule monthly/weekly payments on your calendar as a reminder to keep your payments on track.

7. Reduce overall credit utilization before applying for new credit.

Another important aspect of your creditworthiness is your credit utilization ratio. Your credit utilization is the amount of credit you’re using versus the amount of credit you have available. If you are using most of your available credit on revolving accounts, this may reflect negatively on your report.

If you’re struggling with debt load, consider a debt reduction strategy. As you monitor your spending and make progress on paying your debt, you will end up with less debt and more available credit.

8. Open a credit card account.

Opening a new line of credit typically lowers your credit utilization ratio, which could reflect positively on your credit report―at least in the long run. However, it isn’t a viable strategy to open multiple new credit lines to improve your credit score. The best rule of thumb for new credit is applying only for credit that you need and can afford.

If you’re struggling to pay the debt you have, the last thing you want is additional debt that puts further strain on your monthly budget. However, if you have a limited credit history, few credit accounts, or are effectively managing your open credit lines, then you might consider a new line of credit. Additionally, using your credit card and then paying it off every month is a great way to grow your credit history.

Keep in mind that applying for new credit can trigger a hard inquiry against your credit report. A hard inquiry is when a potential lender pulls your credit report to make a credit decision. Frequent hard inquiries in a short amount of time can negatively affect your credit report.

9. Open a secured credit card or secured line of credit.

If you do not qualify for most credit card offers, you might consider opening a secured credit card. A secured credit card requires you to make a cash deposit—typically enough to match your credit limit. This deposit serves as collateral against the available credit. If you’re unable to meet your payment obligations, the lender will use this deposit to cover the outstanding balance and any potential fees.

A secured credit card works similarly to an unsecured credit card. You can make purchases with the card and then make payments on the balance. The difference between a secured credit card and an unsecured card is that with a secured credit card, the security deposit you provide remains with the bank or credit union to “secure” your credit line, which reduces the risk for the lender. A secured credit card can be an excellent option for addressing credit challenges if you have funds available to secure the card, and using it responsibly will build your credit by establishing good credit history.

Improving your credit profile takes time.

Adding favorable information and reducing negative information on your credit report will improve your chances of credit approval and receiving better loan terms—but it won’t happen overnight. The length of credit history affects overall creditworthiness―the length of time you maintain an account helps indicate how consistent (or inconsistent) you are making on-time payments. The longer your credit history, the more confident lenders are with their evaluation of your creditworthiness.

Even though credit challenges can negatively affect many aspects of your life, there are steps you can take to address the issue. While it might take some time, taking action now can open up possibilities. Download our credit eBook to learn more. You can also contact our partners at GreenPath Financial Wellness for free debt management counseling to help you get started.