Starting Over: Climbing Out of Bad Credit

Credit Repair: How To Fix Bad Credit On Your Own In 6 Steps

Whether you are looking to buy a car or a house, one of the significant obstacles facing you is bad credit. A low credit score is usually anything below 630 on a scale that goes from 300 to 830. It is a reflection of past behavior like missing out on payments or bankruptcy. This can cause you quite a few problems. For example, when looking at mortgages, lenders will often give you a higher interest rate than those with higher scores. Fortunately, you can work on repairing your credit score and even get some loans.

Here are a few tips that should help.

Learn How Bad Your Credit Score Is

The first thing to do is to learn how bad your credit score is. A few points below the 630 threshold should be manageable in a couple of months with minimal work. But a hundred points below means you have to put some effort into it. To get your credit score, you’ll have to request your credit card company or bank. Another option would be to purchase it from a credit provider directly.

Besides your credit score, you should also get a detailed credit report to find out how exactly your score is at that level. It is easy to get a credit report. Federal law requires that credit reporting agencies allow you to get a free credit report every 12 months from their consolidated website. Additionally, EquiFax offers six free reports every year from the company. The reports will show your current loans, loan requests, and publicly available payments. This allows you to pinpoint what you should be focusing on.

Pay Bills on Time

One of the simplest and most effective ways to raise your credit score is to pay bills on time. When determining your credit score, 35 percent comes from your history of paying bills. Every bill you pay improves your credit a bit. The only time it is a problem is when you are late in paying. Even if you eventually pay, the record of your lateness will be on your credit report and drag it down. You should ensure that you are never late paying any future bills by setting reminders or even arranging automatic payments.

Eliminate Existing Debt

Another thing that is dragging down your credit score is if you have any debt remaining. Unpaid debts, especially those that you are late in paying, can negatively affect your score. They usually aren’t a problem unless you are late. The more debts you have, the bigger a problem is for your credit score. Strategically paying off debts one by one should help with increasing your credit score. Additionally, you should consider consolidating your debts. This means taking out one large loan and using it to zero out the smaller loans. The result is that you eliminated several debts and can pay a loan more easily

Try to Utilize Only 30 Percent of Your Credit

You can also raise your credit score by using your credit properly. It is a large part of your credit score. The use of credit is a bit of a balancing act. Too much credit use and the credit bureaus will see you are borrowing constantly. Even if you are paying on time, it is still worrying to lenders. The other problem is not using it at all. The ideal amount of credit use is 30 percent or below. Borrowing more than that lowers your credit score. If possible, you should lower your credit to 30 percent and then move on to 10 percent. Thirty percent is for maintaining the credit score. To raise it, you need to lower it to 10 percent. Paying off the bills is just one way to lower your utilization level. You can also request to raise your credit limit.

Request for Negative Entries Removed From Your Credit Report

One of the reasons for a bad credit score is past bad behavior like unpaid loans and delays. Fortunately, you can remove any negative reports that have been fully paid. It will take some effort, but it can help improve your score greatly. Additionally, your credit report should also reveal any mistakes. If there are any, you should have them corrected immediately.

It will take a bit of effort but you should be able to raise your credit score again. A hundred-point jump is reasonable if you put your mind to it. Once you fix it, the next step is to maintain it or even further increase it. A high credit score can give low interest rates, better insurance premiums, and even high credit limits. Continue with what you’ve been doing and you’ll get a taste of these benefits.

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