You’ll most likely have bad credit if you’ve had years of high credit balances, an overdue student loan, a foreclosure, or collection accounts.
Bad credit makes it hard to get approval for new credit. However, you can still secure a mortgage or auto loan, but be prepared to pay higher interest rates.
With a bad credit score, you can pay an extra $50,000 in mortgage interest compared to someone with a high credit score, ending up with a surplus of $200,000 in interest due to bad credit.
How to Fix Your Credit
1. Have a Look at Your Credit Score Report
Information about your credit usage in the last ten years is available in your credit report. And credit bureaus, such as TransUnion, Experian, and Equifax, can help with your credit report whenever you need it.
Most but not all lenders report to the three bureaus, so you should check the report details. AnnualCreditReport.com offers FREE weekly credit reports until 20th April 2022.
Your credit score is calculated using your credit report, so you must take it seriously. l. You may also come across some credit card providers offering access to your credit report.
You only require a soft credit inquiry (which doesn’t harm your score) to check your score, and you should do this every month.
2. Take Debt Consolidation Loans
Debt consolidation is the most strategic and popular use of personal loans. For example, if you have three credit cards, you’ll have to make three separate payments at varying interest rates every month.
A personal loan lets you borrow the funds required to settle your credit card balance and then repay the loan with a single payment every month. By doing this, you’ll be saving cash in the process because of lower interest rates.
Viva Payday Loans offers borrowers with bad credit scores instant bad credit loans online approval. Upon meeting the minimum demands, you can borrow from 200 dollars to 5,000 dollars with 2-24 months loan periods. The interest rates range between 5.99% to 35.9% for most instant payday loans listed by the loan matching service.
3. Start Paying Your Bills In Time
35% of your credit score constitutes your payment history, which means that you must focus on resolving your monthly payments to build your credit score. If you find it hard to pay all bills on time, use the autopay hack to iron things out.
Some bills like the medical ones don’t permit autopay, so you should settle them immediately after you get them. Likewise, reach out to the office and devise a payment plan if you’re incapable.
You can also set up a budget or schedule your autopay on your payday if you’re concerned about inflating your account.
4. Target 30% Credit Utilization
Credit utilization denotes the segment of your line of credit used at any given period. This is the second most essential attribute in FICO credit score computations after payment history.
The easiest way to control your credit utilization is through clearing your credit card debt every month. If you can’t do this, ensure that your entire outstanding debt is below thirty percent or less of your complete line of credit.
You can reduce it to ten percent or less from thirty percent, which is best if you are looking to improve your credit score.
You can also enhance your credit utilization ratio by asking for your credit limit to be increased. Your credit utilization improves when you raise your credit limit, but this is only true if your balance remains constant.
5. Take Advantage of Programs to Boost Your Score
Some programs can elevate your FICO score by enlarging your credit file. These programs include alternative information as a component of your credit report, and conventional credit scoring techniques don’t usually have this information.
That said, two of the most common programs include:
- UltraFICO: This program is free, but its scoring model analyzes how risky borrowers are instead of assessing subscription payments or utility bills. The program also examines risk by looking into people’s money, checking, or savings accounts.
- Experian Boost: Just like UltraFICO, Experian Boost is also free. This scoring model boosts your credit file by divulging any subscription payments an individual makes, such as HBO Max, Netflix, or Hulu. The program also looks into utility and phone payments. Experian boost increases your creditworthiness instantly.
6. Maintain Old Accounts and Sort Out the Delinquencies
“Age” is also an essential factor in bettering your credit score. The age-of-credit segment of your line of credit looks into how old your credit accounts are. Lenders will deem you favorable if your mean credit age is higher.
Don’t close any old accounts that are no longer in use. While your account’s credit history will still be part of the report, closing the accounts while having a balance on other credit cards will tank your available credit. And this will also increase your credit utilization, thus reducing your credit score.
Resolve any collection, delinquent, or charge off-accounts. For instance, if you’ve missed making any payments at one point or on many occasions, start figuring out how you’ll make future payments in a timely fashion. While doing this won’t make up for delayed payments, it can improve your credit history moving forward.
7. Fix or Dispute Any Errors
Regrettably, credit bureaus can sometimes make mistakes. A study conducted by the Federal Trade Commission established that 25% of people had mistakes in their reports. The study also reported that 5% of people had mistakes that could make taking out a loan pricier for them.
Therefore, while knowing your credit score and report is an excellent first step, looking for errors is also crucial. Disputing the errors is a fairly simple process to have them corrected and attract better credit.
Start Fixing Your Credit Today
Fixing your credit score can be a time-consuming process, but worth it in the end. You can improve your credit card using the tips discussed in this post, or seek the services of a credit fixing company.
Whichever route you take, the key to having good credit is to clear balances on time, prudent spending, and credit monitoring. It’s also essential to exercise patience and adhere to an approach proven to work.