How to Repair Your Bad Credit
Credit repair shouldn’t be challenging. All you need to follow these simple steps to get your credit repaired and improve your credit score.
Are you worrying over your bad credit score?
Well, it can be justified as a poor credit score can hurt your chances of getting a loan or getting it on better terms.
According to the credit bureau Experian, nearly 30% of Americans are standing on the line between bad and fair credit. Only 8.5% of American consumers have a terrible credit score.
A credit score is a three-digit number set between 300 and 850, based on your data in your credit reports. You lenders check your credit scores to determine your ability to pay off loans. 700 or higher is an outstanding credit score, while 800 or higher is excellent. A score between 580 and 669 is considered fair, and something between 300 and 579 is poor.
What if you have the one between 300 and 579?
In other words, what to do if your credit score is bad?
Don’t worry! This is not the end of the world.
There are many reasons why your credit score is poor.
From late payments, not using credit limits to errors on credit reports, there are many factors why your credit score is not in shape.
Here we will work on these factors to improve your credit score. And it is not hard. Just follow the steps given below.
Get the Latest Copies of Your Credit Card:
First of all, you should order copies of your credit card. They are free from the credit bureaus like Equifax, Experian, and Transunion. You just need to contact them. (Click the links to get a copy).
But why order credit reports from all these three bureaus?
This is because some creditors or lenders report only to one of the bureaus. Besides, credit bureaus are less likely to share information, leading to different information on each of your reports. Getting all three reports will give you a complete overview of your credit history and let you fix credit at all three bureaus.
Besides, you can try free credit score tracking apps like Credit Sesame or Credit Karma to figure out where you stand.
Once you get your copy or sign up to the credit bureaus, you can see your credit scores and other information. Credit scores are scaled from 300 to 850. A score between 700 and 740 is considered good credit.
Read Your Credit Reports:
Once you get copies of your credit reports, your next step is to review them for errors. If you have a long credit history, your credit history is likely to be spanning across several pages.
Don’t worry. Take your time and review the report over a couple of weeks. Each credit report contains your personal information, accounts and the items that have been recorded into the public domain like a bankruptcy, and the inquiries that have been made to the report.
Review Your Credit Reports for Errors:
Nearly 25% of all credit reports contain errors. And some of these errors can hurt your chances of getting loan approval. That’s why a credit report should be checked for errors.
Make sure to check your credit report for these errors…
- Incorrect personal info like misspellings and wrong addresses. Wrong accounts or Missing Accounts
- Incorrect public records like foreclosures and bankruptcies.
- Inaccurate accounts info (some closed bank accounts)
- Duplicate accounts
- Derogatory marks
- Fraudulent activities
- Incorrect inquiries.
Keep in mind that any of these errors can hurt your credit score—and whether or not your loan will be approved by a lender. Make sure to get the errors fixed on your credit report. All you need to contact the concerned credit bureau in this context.
Once you report your dispute with the credit bureaus, they should respond to your queries within 30 days, and they are required to provide you all the relevant information and your dispute to the organizations that have given the information.
Your credit score can be improved dramatically once these errors are fixed. Also, contact the lender or creditor that issued the incorrect information on their end.
Dispute Mistakes in Your Credit Reports:
Disputing online is often easier and quicker, but leaves with no paper footprint (although you can take screenshots of the dispute). The same thing can be said about resolving a dispute over the phone.
Here comes the good old method—sending your disputes through the mail.
This way, you can send the proof that supports your dispute, for instance, a canceled check showing that the payment was made on time. Besides, you would also have a proof of the date/time you mailed your dispute.
If your dispute is found genuine, the bureau will change and inform the other credit bureaus, and provide you with the updated copy of your credit report.
However, if the information is not removed from the report, the report will be updated to show that you have disputed the information. You will be allowed to add a personal statement to your credit report. The lenders can get additional insight into this personal statement while reviewing your credit report.
If you are still not satisfied with this or the way your case was handled by the bureaus, you can complain to the Consumer Financial Protection Bureau by providing them all of your correspondence to prove your dispute. The CFPB will contact the credit bureaus on your behalf to resolve the situation.
Pay Overdue Balances:
Besides reporting the errors on your credit report, you should focus on paying overdue balances. Payment history is an important part of your credit scores, meaning that past due accounts can hurt your credit score.
You should pay overdue balances on your accounts within 30 days. A lender can report your account to the credit bureaus if you exceed the limit of 30 days. The late you get with your payment, the negative it is for your credit. Even worse, late payments can stay on your credit report for nearly seven years. You should pay them off as soon as possible in order to repair your bad credit.
Raise Your Credit Limits:
Credit card companies set a credit limit for each borrower.
And this credit limit can affect your credit score.
If you don’t use more than 50% of your available credit, it can negatively affect your score. Ironically, exceeding your credit limit will also impact your score. Ask your credit card company to increase your credit limit. Your creditor shouldn’t have a problem if you have a decent payment history.
Opt for a New Credit Card:
Opening a new credit card account can help you manage your credit utilization ratio. Your score will get better with the smaller ratio. Make sure to check if you can afford an annual fee. Be careful as opening multiple new accounts at once can hurt your credit score, as it makes you appear riskier to your prospective lenders.
The length of your credit history is also important. Old accounts with sound payment history can support your credit score. Therefore, be careful when it comes to closing the account. To conclude, older accounts help you build your credit score.
Minimize Your Interest Rates:
Not all people are able to pay down their debt. However, the optimal solution is here to lower your interest rates. It will help you decrease your monthly payment as well as the deadline it takes to pay off your debt. You need to negotiate with lenders directly to get a lower rate.
Another solution is to consolidate at a decreased rate. For example, you can opt for a personal loan with a lower APR, then using this fund to pay off your high-interest debt.
So these are some ways to repair your bad credit. It is all about reviewing your credit card for errors and getting them fixed; paying outstanding balances; taking care of your credit limits and minimizing the interest rates.
Author Bio: Nicholas Houston is a finance expert and writer. He has years of experience in credit repair and tax preparation.