My clutch engages too early. Like when I just barely release the clutch it starts pulling. I need to set my lever out to number 5 (out of 6) so that is engages a little more normal mid way, but it's not very comfortable for my hand. How do I fix this? Could there be air in the clutch hose that is causing the early engagement?

Certainly could be.
As a start you need to look for leaks especially at the slave end.
Then you could try bleeding the system.

HGave you had your clutch apart recently? I had exactly this problem but it turned out it was because I had accidentally reinstalled the two end friction plates back to front. This prevents the clutch pack sitting exactly in the basket and results in what you describe.

But it is more likely to be in need of a bleed. When I did mine I was getting paranoid about trapped air and was advised to bleed upwards using a big syringe. Did this and quite a lot of additional air came out from the clutch master cylinder that does not always make it down to the valve at the slave end.

Have exactly the same issue with mine, bleeding seems to be the cure so?