Man checks his credit
Your credit score is a numerical representation of how responsible you are with your finances and, by extension, how trustworthy you are as a borrower. So if your credit score has fallen, whether through your own negligence, an error in reporting or a case of stolen identity, it’s essential for you to repair your credit score as soon as possible. That can help ensure you will be eligible for mortgages and loans and lines of credit at the best rates. Repairing your credit score relies on a scientific process of identifying the problematic areas of your credit report and taking pains to report errors or demonstrate consistently responsible behavior to curry favor from credit reporting agencies.
Get Your Report
First things first, look under the hood of your credit report. You can access your credit report for free of charge once per annum through the web site Annual Credit Report. The federal government requires the three reporting agencies, Experian, TransUnion and Equifax, to run this website for all consumers. You can also get this information by calling 877-322-8228.
This is the foremost important initiative to fixing your credit because it’ll tell you what’s pulling your credit down. As a general rule you want a credit score above 700 in order to qualify for most loans, leases and credit options.
Your credit report should show not just all outstanding loans in your name, but all events of any kind which are affecting your credit. This can include unpaid bills, personal information, percentage of used credit and even simple credit inquiries. (Yes, having someone check your credit can reduce your score, even if you don’t take out the loan.) These events can affect your credit for up to seven years, so there’s a good chance this report will include things you don’t even remember.
Check for and Dispute Errors
Read your credit report thoroughly and make sure that all of the information it contains is accurate. The reality is that the credit reporting agencies often make mistakes. According to the buyer Financial Protection Bureau roughly one in five consumers has a mistake on their credit report which can be dragging their score down. Because the law makes it your job to seek out and report these errors (on a credit report back to which you’re only given free access once per year) the reporting agencies do little to police for accuracy themselves.
Look for mistakes such as:
Incorrect personal information
Accounts or loans you did not open
Accounts listed as open that you have closed
Bills listed as unpaid that you simply have paid or otherwise resolved
Accounts incorrectly listed as late or delinquent
Debts or accounts listed multiple times
If you find a mistake, dispute it. Gather the paperwork necessary to prove your claim (for example, a canceled check from a bill that you paid). Then write to each credit reporting agency with this dispute and a copy of any paperwork you have. Never, ever send the originals. you can get help from fast credit repair service
The CFPB has more information on disputing inaccurate reports on its website, as does the Federal Trade Commission.
Address Unpaid, Delinquent and Defaulted Accounts
Once you’ve got corrected any mistakes on your credit report, your next steps are financial.
Ultimately there are four ways to create good credit and repair bad:
Pay your bills on time and in full
Have no delinquent or defaulted lines of credit
Use alittle portion of your total credit at any given time
Limit your applications for new credit
If you have bad credit and there are no errors on your report, the odds are very good that you have multiple items on your credit report listed as late, delinquent or defaulted.
It’s important to understand that even a small late payment can have a large impact on your credit history. This is not an industry built to guard the buyer . As a result it embraces many counter-intuitive and sometimes hostile practices. For example, making timely payments on a utility bill doesn’t build credit or help boost your credit score. However missing a payment by even one billing cycle can drag down your score by as much as 30 points in a single month.
As a result, your next step is to scan your credit report for any bills listed as late or otherwise outstanding.
To the extent financially possible, bring all of those accounts current. Pay anything listed as late or unpaid. Set your regular bills (such as utilities, credit cards and loan payments) to auto-payments to ensure that they register as on time going forward. If necessary set the auto-payment to the account’s minimum monthly payment. That’s fine from a credit standpoint, because it will register the account as paid on time monthly .
Overall what you are trying to do here is catch up all of your accounts to “current” status. On time payments are the most important part of a credit score, and late payments will erode your score much faster than most consumers realize. It is important to fix that.
Beware of Scams
The credit industry is made on the premise that, if you’re in touch with it, you’ll be exploited. People with bad credit often struggle with money problems and are frequently desperate. This makes them highly vulnerable to predatory behavior.
Consumers complain about exploitative, manipulative and deceptive tactics in this industry. Companies and law firms will promise to repair your credit overnight, charging high fees and delivering little reciprocally . The credit rating agencies will try to charge you for access to information you are entitled to by law. Even websites offering legitimate information will bury those links below the fee-based services and other gimmicks.
Be careful. Be deliberate. Do not pay for anything unless you have researched it thoroughly. And if someone is promising you an overnight fix, approach their offer with the same common sense that you would in any other aspect of life.
The Bottom Line
Fixing bad credit takes time, but it are often done. From challenging errors on your report to ensuring rigorous on-time payments, this is a difficult project that is well worthwhile.
Tips for Handling Your Credit Score with How to Fix Your Bad Credit Score
Consider lecture a financial advisor about protecting your credit score. Finding the proper financial advisor who fits your needs doesn’t need to be hard. SmartAsset’s free tool can match you with up to 3 local financial advisors, and you’ll choose the one who is best for you. If you’re ready, get started now.
You can also use credit cards to assist your score while earning valuable rewards.