Do you have bad credit? Here’s what you can do to fix it
It’s no secret that to have bad credit can seriously affect their financial experience. The worse the credit score, the worse the experience.
“Bad credit is usually any score below 650, although it can certainly fluctuate with credit usage,” said Alex Miller, founder of UpgradedPoints.com, a digital platform that offers financial advice. to travelers. “Specifically, bad credit can lead to higher interest rates, less money offered on loans, denial of credit cards, and a more difficult time to complete day-to-day transactions, such as buying money. getting a car, getting a mortgage or other routine chores. It can even lead to job refusals for jobs that check credit history. “
However, that doesn’t have to be the case, not when repairing bad credit is a very doable proposition.
“There is no shortcut to correcting a bad credit score, but like many things, it can be done with hard work and diligence,” said Matthew Gaffey, Certified Financial Planner at Corbett Road Wealth Management. , in McLean, Virginia.
If improving your credit score is your goal, consider following these steps:
- Check your credit score
- Pay off all debts in collection
- Consolidate your debt
- Get less than 30% credit usage
- Use a credit monitoring tool
- Dispute an error on your credit report
Confused about where you fit in the credit score spectrum? Then you should start using a credit monitoring service to track changes in your credit score. Credible can help you set up a free service today.
1. Check your credit score
The first step to repairing bad credit is to visit annualcreditreport.com where you can get a free credit report. “The reports are updated weekly and are free,” said Clint Lotz, president of TrackStar.ai, a predictive API for the financial industry.
2. Repay the debts in collection
Financial consumers looking to repair their credit should enter repayment mode. Debt collections should be a priority because they make a difference on credit reports.
“We all know a collection is a bad thing, but if someone with bad credit were to pay off that collection today and it was an emergency room visit three years ago, the” date of last activity “on the credit report will be updated from three years ago to today,” Lotz said. “This move is virtually guaranteed to significantly reduce the credit score.”
3. Consolidate your debt
Another step to start improving your credit score is to consolidate some or all of your debts. “A lot of banks, credit card companies, and other lenders would like you to consolidate their debt with their particular business and will likely encourage you to do so,” Gaffey said. “For example, some will provide you with 0% interest on that debt for a specific period of time (that is, six, 12, or 18 months).”
Visiting Credible Can Help You Compare Debt Consolidation Options to find the best personal loan rates for you, based on your credit rating and credit history.
4. Get less than 30% credit usage
If a consumer has lines of credit where more than 30% of the limit is used up, known as credit usage, start paying them off as quickly as possible. “Using credit makes up 30% of a credit score and may be one of the fastest ways to increase a credit score,” Lotz said.
5. Use a credit monitoring tool
The advantages of using a credit monitoring tool are many.
“First and foremost, they provide constant monitoring of all three credit reports, with real-time alerts and notifications of any changes,” said Nicole Kubin, founder of Strategic Divorce Advisory, a New York-based financial services company. York. “A credit monitoring company may report identity theft issues and may even be able to offer identity insurance to cover the expenses necessary to restore your identity. Reports are especially useful if you are trying to improve your credit score because they will demonstrate the direct impact of a certain action or inaction on your credit score. ”
Consumers should be aware that some credit monitoring companies charge a monthly fee ($ 10 to $ 12 is a common fee range). And some providers, such as major credit rating agencies and some lenders (especially credit card providers), will offer free credit monitoring.
If you’re considering credit monitoring, check out Credible. With a credit monitoring service, you can receive instant alerts about late payments, fraudulent activity, credit score changes and more. Check out some of Credible’s partners here.
6. Dispute an error on your credit report
Challenging and correcting errors on your credit report can also help financial consumers improve their credit scores. “In order to verify the accuracy of your credit reports, start by obtaining copies of your credit reports from the three credit bureaus: Experian, TransUnion and Equifax,” Kubin said. “It will be even easier to compile this information if you use a credit monitoring tool.
If you find an error on your credit report, contact the credit reporting company by certified mail or online through the company’s website or mobile app.
Also, if you find items or accounts on your credit report that you don’t remember opening, you may have been the victim of identity theft. Notify your bank and issuing companies immediately. your credit card, as well as all lenders, ”Kubin added.
Your credit rating is usually one of the first things lenders look at when considering giving you a loan. To make sure you stay up to date with your credit status, register with a credit monitoring service. Credible can help you get started.
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