Tips to Fix Bad Credit Scores
If you have a bad credit history from some mistakes made in the past, rest assured you are not alone. Many people have a low credit rating, but there are things that you can do to improve it as long as you are dedicated. And you are now at least one step ahead of others by doing your research on how to fix bad credit scores.
The first step should be for you to determine how bad your credit score really is. To do this, you need to obtain a copy of your credit report – you are entitled to a free copy once each year from AnnualCreditReport.com, and there are three credit bureaus you can get them from (Equifax, Experian and TransUnion). Apply for a copy from one of the bureaus every 4 months, and you will be able to have a look at your score for free all year. It is important to review this document for any errors and get them corrected through your credit card lender, as this could be a large factor in your poor credit score. It is also a good idea to know where you are at in terms of rebuilding, so you know how far you have to go. Once you start to make changes, however, monitoring your own score can be satisfying as you see it improve. These changes will not happen overnight, so you have to keep in mind that you need to be patient and diligent in order for this to work. If it turns out that there are no mistakes on the report and that the score comes from your own doing, some habits will need to be adjusted.
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Paying your credit card bills on time is a huge factor in upping your rating. If this is a problem for you, consider making yourself a reminder about when credit card bills are due, in an online calendar or a day planner. Make the reminder for a few days before it is typically due, to ensure you’re able to pay it before the due date passes. Alternatively, if it is a bill that is the same each month, say a cell phone bill or car payment, set up automatic withdrawals so you don’t have to worry about missing the deadline. Another method to ensuring that you pay up before it’s too late is to not let your bill out of your hand until you make at least the minimum payment. This ensures that some part of it is paid before you put it down and forget about it, and you can pay more on it later in the month if you wish.
If you have any outstanding collections accounts, make sure to pay those off as soon as you are able to. Collections are a big hit on your score, and can potentially be somewhat of a quick fix in terms of improving your credit score. If you pay down your collections accounts, it gets removed from your report. Don’t avoid those phone calls anymore – sometimes collections companies will accept less money than the original debt simply to close your collections account.
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These fixes aren’t always easy – that’s why you got into trouble in the first place. If you have bad credit and poor money managing habits, paying your credit card bills on time is not always possible if you keep doing what you’ve always been doing. You might have to look at your spending habits and make some adjustments if you are serious about building your credit back up from a low rating. Look at monthly bills and see if there are things you can cut – small daily luxuries like coffee or lunch out, or maybe you can call your cable company and get a smaller TV package. If money coming in is not your problem, you need to find the root of why your credit is poor. Keep track of your monthly spending habits to see where the problem is, and devise a budget to help. If you routinely spend your entire monthly credit limit, it might be time to look at increasing your limit on a credit card or two (if you are able to without getting into financial trouble all over again), or perhaps paying for a few things in cash. Using your whole credit limit each month makes you look risky, which is exactly what you would like to avoid when attempting to repair your credit. For example, if between your 3 credit cards you have a monthly limit of $3,000 and you place that much on them, see if you can get a balance increase of $500 on one, and pay a bill or two in cash. Then you would have a limit of $3,500 with monthly spending at approximately $2,700, and you are only spending 77% of your limit each month. This is better than charging it all, but ideally you would like to have about only 30% of your credit limit used each month. Getting a new credit card is not the best solution here, because each time you apply for a card, you take a small hit on your credit, which is what you are trying to avoid. Best to work with what you have until you are able to build it up enough that you feel safe applying for another one. If you really need another card though, an option to look at might be a secured credit card. You pay a certain amount upfront, and the money that you spend is deducted from that, so making a payment for money already out of your pocket is taken care of. You simply need to put more money on it before you can spend over your limit.
There are many ways to rebuild bad credit, but keep in mind that they often take a long time. Even though it may feel like you got into trouble almost overnight, it takes months or years to lift it to where you want it to be. Being informed about your own credit history and making changes to your current credit card habits are very important building blocks to having a secure financial future, and every little bit that you can do now helps.