You can fix a bad credit score. The key to fixing a bad credit score is to improve it. There is no fastest way to repair your credit. This is because building credit takes a while.
You need to establish a good credit history to be rewarded with a credit score.
Usually, this takes anywhere from 6 months to 18 months to be within the fair to good credit range. My article, What You Need To Know About Credit and Credit Score, breaks it down very well. You can read it to get a clue about the American credit system.
While we are on the subject of a bad credit score, here is what would be considered a bad credit score.
What Is A Bad Credit Score?
It depends on the credit score used to ascertain your credit score. There are two most used credit score system in the United States. Namely: FICO Score and Vantage Score.
A bad FICO score would be less than 669. Anything 669 or above FICO score is considered fair and good for any loans. Meaning- you may qualify with no crazy interest rate.
On the other hand, a bad Vantage score is below 600. This is considered either poor or very poor. Please read the blue article I referred to you earlier to get a full grasp of the credit score systems.
If your credit score for either of the credit rank system is bad, here is what to know about your financial fate.
Consequences Of Having A Bad Credit Score
Here are the consequences of having a bad credit score:
- You may not qualify for loan, credit cards or mortgages. Or, you could qualify for them with high interest rates.
- It is going to be hard to afford housing, since apartment rental companies use credit score to access a renter.
- Bad credit can affect you for seven years. Meaning any blemish on your record will stay on your credit history for that long.
- A potential employer is allowed to check your credit history for hiring purposes. As a result, a bad credit may affect your career opportunities.
On the whole, a bad credit score is bad business for any working class adult. Do not worry though. You can easily clean up a bad credit score. Here is how to go about it.
Best Ways To Fix Credit Score
Fixing a credit score requires patience. This is because you will not see significant changes, until about six months into it. Do not get wrong. Your efforts will be reported every month, however the small increments will only add up to something tangible after a while.
Having brought this to your attention, here are the best ways to fix your bad credit score.
1. Ask Your Bank For A Beginner’s Credit Card
Your bank has a beginner’s credit card. Usually, a bank will lock some money in your bank account to secure this card for you. The money will serve as an insurance, in case of non-payment of credit card debt.
To simplify, your bank may ask you to put down $500 so they will give a credit card with a $500 credit limit. Every month you are expected to pay back debt on the credit card, which is reported to a credit bureau. Whenever you fail to make a monthly payment toward your credit card debt, the bank deducts the amount from the $500 deposit.
Do you understand how it works now, my dear reader?
A beginner credit card will improve your credit score fast in about six months or so. As long as you keep paying down the debt on the credit card every month, your bank will send positive reports to a credit bureau. Therefore, repairing your bad credit score with time.
2. Never Max Out On A Credit Card
Maxing out credit cards is bad for your credit score. The only remedy which could improve such bad credit score is to start paying down on the maxed-out card. Each monthly payment made on the maxed out credit card is reported to a credit bureau.
Try to get below the borrowing limit of your credit card, otherwise each monthly report to a credit bureau will always show you maxed a credit card. This is not good for your credit score, until you have either paid off the mixed credit card or get below the credit limit again.
Here is a tip which will help in the future with respect to credit card utilization. Never spend more than 70% of your credit balance. This is because your credit score starts depressing again, as it gets to 100% utilization. This is especially, when you are struggling with the fees associated with a maxed-out credit card.
3. Be Onto Of Your Monthly Bills
You can fix your credit score, just by consistent with your monthly bills payment. Monthly bills like car notes and student loan debt repayment are reported to the credit bureau. A consistent payment of such monthly bills can repair your credit score with time.
Your monthly rent payment is not reported to a credit bureau. However, failure to pay rent per lease agreement can ruin your credit. This is because rental companies will report this behavior to a credit bureau. As a result, your credit score will be negatively affected.
You could about things which negatively impact your credit score, in order to avoid them. For now, stay on top of your monthly bills. This is especially your car note, mortgage or student debt payment. These will fix your credit score fast within a few months.
4. Check Your Credit Reports For Errors
Credit report errors can hurt your credit. Checking your credit report annually is highly recommended by the Free Trade Commission Consumer Advice. Did you know you are allowed one free credit report request per year?
You can read where to check your credit score for free for places where you can do it.
The reason why this is important is because credit report errors happen occasionally with the credit bureaus. If it is a negative credit report, it could have a devastating effect on your credit score. Hence, the importance of checking your credit reports from the three credit bureau for errors.
The most common type of error on credit reports is a mistaken identity. It happened to me two years ago. A credit card, which I never opened was added to my credit report. How easy was it to fix this error on my credit report?
I used Credit Karma to dispute errors on credit report. All I was required to do was to make a comment, send it and wait for an investigation result. The error was later removed from my credit history.
As a result, my credit score improved.
You can figure out how to go about a credit error dispute on the blue highlighted article above. If your low credit score is a result of a credit report error, it will not be hard to fix the bad credit score.
5. Do Not Abruptly Cancel A Credit Card
The reason why abruptly canceling your credit card can lower your credit score, is because there may be pending monthly fees or charges. This is why it is important not to cancel your credit card on your credit card company app.
Call to confirm you are clear to cancel your credit card.
I know this from experience. When I was building credit for the first time after arriving in the States, I used a credit card. After I paid off the debt and I had a good credit score, I abruptly canceled the credit card. And, you could guess what happened next.
My credit score dropped by +30 points. So, be careful canceling your credit card abruptly. Be sure to call your credit card company first to be sure there is no upcoming maintenance charge before canceling.
6. Get Help From Credit Repair Companies
Some credit repair companies have this program, where they go through your credit history and fix any issues they find. Whenever they find anything negative which had impacted your credit score, credit repair companies will negotiate on your behalf to work something out with the credit bureau. All you have to do is pay a fee for their services.
Is paying someone to fix your credit worth it, my good reader?
I sincerely do not think it is worth it, unless you do not want to put in the work. This is because the result produced by a credit repair company, is the same as when you do the work yourself. The time will neither shorten, nor be quicker than usual because a credit company handles your case.
But, I still recommend using one when you are not good at tracking your items on your credit report. The goal is to fix a bad credit score. Just be careful of companies promising to give you a good credit score in a month or two. It is not possible.
What Builds Your Credit Score the Most
Out of the listed ways to improve a credit score, the fastest way to repair your credit score is to use a credit card. I know this sounds contrary to what you want to hear, but having and paying off debt is the only way to build a credit history. Therefore, accumulating points for a credit score.
Also, your student loan debt payment can work the same magic. If you are still in college though, this will be very difficult. This is due to the fact you are not allowed to pay back student debt as long as you are still in school.
On the whole, it is not hard to fix a bad credit score. It requires great patience. Beware of anyone promising to fix bad credit fast. It is a process which takes months to build. This is because you have to establish a credit history first. You can only do it, when there is a history of continuous monthly payment towards a debt over a period of time.
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