5 Steps Freelancers Can Take To Improve or Repair Their Credit

What you need to do to improve or repair your credit isn't a secret, here's everything you need to know.

By Kevin Ha • Feb 26, 2023

If you’re starting your own business or looking to grow your business, having a good credit score can be critical. It determines your ability to get financing, as well as the interest rate you receive. Improving your credit score might seem like a daunting task, but the better your credit score, the more access to financing you’ll have available and the better your interest rates will be.

Your credit score ranges from 350 to 850 and is generally calculated using 5 categories of information, each with varying weights. These include the following:

  • Payment History (35%)
  • Amount of Credit Limit Used (30%)
  • Length of Credit History (15%)
  • Number of Credit Inquiries (10%)
  • Types of Credit Accounts (10%) 

Unfortunately, for many of us, our credit scores simply aren’t where we’d like them to be. Whatever the reason, there are steps you can take to improve or repair your credit. Here are five steps you can take right now.

Get a Copy of Your Credit Reports

You can’t take action on your credit if you don’t know where you stand. So, the first thing you should do is get a copy of your credit report from each of the three major credit reporting agencies (TransUnion, Experian, and Equifax). 

Under federal law, you’re entitled to receive one free copy of your credit report per year from each credit reporting agency at annualcreditreport.com. It’s important to note that getting your credit report will not give you your credit score. However, free apps like Credit Karma, Credit Sesame, and WalletHub will give you a general idea of what your credit score looks like. 

Dispute Any Errors On Your Credit Report

After you receive your credit report, you should carefully review it to determine that everything in it is accurate. While major errors aren’t common, they can happen. And if you see any errors on your credit report – even minor ones – it’s worth disputing or correcting them. The sooner you fix any errors, the easier it’ll be to improve or repair your credit.

You can typically dispute errors online at the credit reporting agency’s website or you can send a letter to the credit reporting agency to let them know of the error. Be sure to submit any documentation you have to support your dispute.

Another option is to use an automated service like Dovly, which can dispute errors on your behalf.

You can find more information about how to dispute errors on your credit report from the Federal Trade Commission website.

Pay Late and Past-Due Accounts

Your payment history is the most important factor that makes up your credit score. This makes logical sense – lenders want to be sure that they’ll get paid back and a history of on-time payments shows that you can do that. If you want to improve your credit score, you need to catch up on any late payments. 

There are two things you can do to get caught up – spend less than you earn and do whatever you can to earn more income. Creating a budget is a great strategy you can use to help you spend less than you earn. Figure out how much you make each month. Determine what you need to spend each month. And use the remainder to pay down debt

After you’ve created a budget, consider picking up a side hustle to improve your income. There are a lot of ways to earn extra money these days. The great thing about side hustling is that every dollar you earn from your side hustle can go towards paying down your debt. 

If you do these two things – create a budget and earn more income by picking up a side hustle – you’ll be well on your way to improving your financial standing. 

Improve Your Credit Utilization Ratio

The second most important factor of your credit score is your credit utilization ratio. To a lender, the more credit you are using, the more risk they face that you won’t be able to pay them back.

To determine your credit utilization ratio, take the amount of available credit you have and divide it by the amount of credit you are currently using. For example, if you have $10,000 of available credit and have a $5,000 balance, your credit utilization ratio would be 50%. 

A high credit utilization ratio can have a dramatic impact on your credit score. Indeed, it’s almost as important as your history of on-time payments. That means a high credit utilization ratio can hurt your credit score in almost the same manner as making late payments!

If you can, try to reduce your balance on your credit cards to improve your credit utilization ratio. Lenders typically prefer a credit utilization ratio under 30%. So, if you have $10,000 of available credit, it’s best to keep your outstanding balance below $3,000.

Pay All Bills On Time Going Forward

As previously stated, your payment history is the most important factor when it comes to your credit score. That means if you want to repair your credit, you need to keep paying your bills on time. There’s no way around this.

Creating a budget and picking up a side hustle (or two) are two surefire ways to make sure you have enough money to make on-time payments.

In addition, make sure you know when your bills are due. If you’re comfortable with it, setting up auto-pay for all of your bills is a great way to make sure you never miss a payment. Otherwise, be sure to set reminders so you never forget.

Final Thoughts

Your credit score is really important. If you have a better credit score, you’ll get lower rates on things like car loans, mortgages, and personal loans. Your credit score can even play a role when it comes to employment or housing. Whether it’s right or not, employers and landlords often look at your credit score to determine whether you’ll be a good employee or tenant. 

If this all feels overwhelming, start small with a trusted credit repair app like Dovly. Apps like Dovly can help boost your score with an automated credit repair engine that tracks, manages, and fixes credit scores. Dovly has a 92% success rate turning credit scores the right way round so you can get back to expanding your business without the burden of a bad credit.

The things you need to do to improve or repair your credit aren’t a secret. If you pay your bills on time and keep your credit utilization low, you’ll be well on your way to a better credit score.

Written by
Kevin Ha

Kevin Ha is an attorney, writer, gig economy expert, side hustler, and the blogger behind Financial Panther.