How to Fix Bad Credit
Bad credit can make life more difficult than it needs to be and can make it almost impossible to qualify for loans and financial products. And unfortunately, bad credit can affect far more. Many landlords check credit scores before they rent to new tenants. Many employers will check the credit ratings of prospective candidates before hiring them. Business offers, such as qualifying for a free cell phone or other services, often apply only to those who have no recent or current history of bad credit. Even utility companies may require deposits from people with bad credit before they will start service.
The good news is that knowing how to fix bad credit is easy. The bad news is that it can take time to repair bad credit, so start today with our credit repair tips.
To fix the problem you need to identify what has initiated the bad credit score, thus the first step toward a solution is to get copies of all three credit reports—Experian, Equifax, and TransUnion. Credit scores are calculated from the information contained in the reports. Examine each entry on the credit report. If any entries are incorrect, follow the procedures to dispute the debt. Creditors make mistakes. Provide them with all information they need to recognize there is an error. Negative entries removed from your credit report will cause an immediate improvement in your credit; the entry receives paid status, and any notes of late or unpaid status are removed, making it a very beneficial credit repair tip.
Contact any non-traditional creditors who appear as a bona fide ding on your credit score, especially medical offices or other health care professionals. Certain organizations often accept payment for less than the total amount you owe—sometimes as low as 40% or less—because often the payment you can afford is more than they would get by sending your account to collections. If they won’t take a lower payment, ask if they can put you on a payment plan. If they do, ensure that the payment agreement assures paid in full status and removal of the negative history.
Next, a helpful credit repair tip is to pay every active creditor their minimum payment every month. A major part of your credit is your payment history. Every “on-time” report from a credit improves your score no matter how small the payment. All information on your credit ages and newer data is weighted heavier, so every month an account that reports as “paid” or “on-time” improves your score. If you can’t pay everyone, prioritize all accounts that still show as current on your credit report.
If you do not have any active credit, get some. It might sound like the wrong move, but your credit rating only takes into account how you use credit. When thinking of ways how to fix bad credit, you have to begin making good credit. Money in a savings account or a good-paying job are great things to have, but they do not improve your credit. No matter how bad your credit is, you can find a bank that will issue you a secured credit card with a limit equal to the amount you deposit with them. It won’t change your financial situation, but an active account with an on-time payment history will begin to repair your credit right away. Creditors may not bother reporting unused accounts with a zero balance, so be sure to use the card at least once every month, and pay the bill on time for maximum effect on your credit.
If you have enough money to pay down some of your debts, pay your revolving accounts like credit cards or equity lines first. Another major part of your credit score is your credit utilization, or how much of the total credit you have available to you. Paying a car loan will lower the balance on the loan, but it won’t help your credit as much as paying the same amount on a credit card because, although the auto loan balance shrinks, your available credit does not increase.
Another tip for how to fix bad credit is to mix up your types of credit. If you only have credit cards or store credit accounts, get a different type of account such as an auto loan. This can provide an immediate boost to your credit. Lenders like it when customers can manage multiple types of credit. On-time payments to both a credit card and an auto loan improve your score right away, faster than having only one type of account.
Ask for a higher credit limit. Your current lenders might be willing to increase your credit line, especially if you have been a long-time customer. A higher credit limit means your overall credit use will be lower. $10,000 of $20,000 is lower than $10,000 of $15,000.
Enrolling in the Experian Boost™ program is another great top on how to fix bad credit fast. The commercials are silly, but it can help some people improve their credit by including other payments that typically are not reported on your credit report, for example, a good track record of paying your mobile phone plan every month, or your electric bill, or even your rent. The program helps people with new credit or those with few credit entries the most.
You may be able to improve your credit by being added as an authorized user on an account of a trusted family member in good credit standing. You don’t even have to use the account or ever make a charge. Just being added to the account might be enough for the lender to report positive information in your name. Be sure to pick someone responsible, because just as their positive information will be reported to your credit, so will any negative information if that family member misses payments.
Be patient. It can take a while to fully fix bad credit. Many negative entries stay on your credit for up to seven years. The good news is that every positive step counts more than older negative entries. Keep moving in the right direction and your credit will get better every month!
Don’t let bad credit hold you back in life. Contact Key Credit Repair today to see how we can help you turn things around.