Easy Ways to Fix a Bad Credit Score
Below we list some surprisingly easy ways to improve your credit score at no cost.
A credit score is a number between 300 and 850 that shows how efficient a person is at paying debts. The higher the score, the more likely a consumer can get approved for loans.
A poor or damaged credit score, usually below 670, means you can’t secure loans from banks and moneylenders. As such, you can’t purchase a new vehicle, rent an apartment, or buy your dream home.
Luckily, all is not lost. By keeping tabs on your credit score and paying all your loans on time, you can fix your credit score.
Highlighted below are seven ways to fix your ruined credit score. Let’s check them out!
Tips To Repair Your Credit Score
1. Monitor Your Credit Score and Reports
Credit reports contain a history of your credit usage details dating back to 10 years. The reports help to determine your credit score. There are three bureaus that keep track of your credit usage, namely: Experian, TransUnion, and Equifax. Most creditors usually report all three bureaus, but some only report to one. Therefore, it’s worth running a credit check on all three.
Alternatively, you can visit Annualcreditreport.com and enjoy weekly credit reports for free until the 20th of April, 2022. You can also use free credit scoring website to check your credit score. Run a soft credit inquiry once a month. It’s mostly free and doesn’t hurt your credit score.
2. Address Any Present Errors
Credit bureaus are not as perfect as they appear, sometimes they submit credit reports with errors. As a fact, some errors in your credit report can cost you a lot when trying to get a loan.
Although it’s wise to know your credit report and score, be cautious of errors. If you discover any, dispute them and get them corrected.
3. Pay Your Bills on Time
Autopay eliminates the hassle of delayed payment. Once you’ve set up a budget and scheduled the payment period, your bills will get settled on it. In case of medical bills that don’t support autopay, clear them as soon as you get them. Otherwise, visit the office and design an accommodative payment plan.
Keep in mind, paying bills on time is a crucial part of the credit score process. Payment histories make up about 35% of all credit scores.
4. Maintain Your Credit Utilization Ratio Below 30%
Lenders use the credit utilization ratio to determine whether you can manage your finances. Any ratio between 0% and 30% is passed off as good. Credit utilization ratios are calculated by dividing the debt you owe by the total credit limit in your cards.
5. Clear Outstanding Debts
Payment history is by far the most influential factor in credit score. Therefore, it is only important to clear outstanding loans in the shortest time possible. If you don’t know which repayment method to use, consider the snowball method or debt avalanche. The technique focuses on settling smaller debts first, then moving to bigger debts.
Paying debts might hurt your credit score. But don’t worry! It’s a worthy move in the long run since your credit score will improve significantly.
6. Don’t Discard Old Credit Cards
Long credit history makes about 15% of the credit score, so don’t be too quick to toss off an old credit card after paying it off. The longer the history with a credit card, the better the chances for excellent scores. However, you can close your previous card if it charges an annual fee.
7. Only Take Credit When It Is Necessary
Each time you apply for credit, you lose up to 5 credit points. That’s because the creditor has to run a hard credit check. Additionally, it lowers your account age, which might affect your credit score. Therefore, it is vital to take credits only when necessary to avoid such scenarios.
What Are Credit Repair Companies?
Credit repair companies address negative details in your credit reports. Unfortunately, they charge a lot of money for their service. You might have to pay them between $50 to $100 per month. In addition, the services fix only a small part of your credit score.
If you can learn how to repair your credit scores, it would be easier, cheaper, and faster. But, if you need professional help, nonprofit credit counselors offer affordable services. Find them through National Foundation for Credit Counseling.
How Long Does Fixing Credits Take?
There’s no time limit for fixing a credit score. Sometimes it can take a year and other times a few weeks. It all depends on how bad your credit score is. But the fact is, fixing bad credit is a long-term process that might require changing habits.
After following all the above steps, you will need to monitor your credit score constantly. This way, you can identify errors in your reports and learn how to navigate the credit world.
A good credit score makes you eligible for loans and credit cards and gives you more negotiating powers. However, sometimes you might find yourself with a bad credit loan, especially after defaulting a loan or falling victim to identity theft.
The seven tips above will help you improve your credit and get you back on track. That said, we hope you have found this article helpful. Thank you for taking the time to read our piece.