We have become a society of debtors. The buy now pays later mantra has become the norm for most Americans. How did this happen and how can we change it? Fifty years ago, having debt was frowned upon, people saved for things they needed or wanted.
Even a generation ago we were told if you were using credit cards to pay for groceries you had a debt problem. Now everyone has a pocket full of cards that they use like free money. Sooner or later though the debt will catch up to you. Whether it’s buying your dream home, a new car, or that big dream you will need to have good credit. Knowing where you stand is the first hurdle in getting out of debt.
Intro for How to Start Fixing Your Credit Score
Before you can fix your credit, you need to understand the basics. This is done by checking your credit report. Everyone can check their report for free once a year. Pull up a free credit report and firstly see what your creditors are looking at. You can usually print it out so you can really study it. Make sure there are no mistakes. If there are errors, you want to contact the credit bureau and have them corrected. There are two major credit reporting bureaus so be sure you checked them both. Be prepared, sometimes they will want proof that you paid this debt. Also, any debts that were in collections will stay for seven years, even after they are paid.
Increase Your Credit Score from 400 to 800
The higher your score is the better. Having a score of 600 or less means you’re a risk and businesses might not want to take a chance on you. But if you increase your credit score from that range and into the 700-800’s you can get approved for just about anything.
The Road to Good Credit
Use Your Credit Cards Sparingly
This will be hard at first, almost impossible, but the sooner you wean yourself off them the better. Take them out of your wallet and put them somewhere hard to get to.
Never Pay the Minimums!
If you are only paying the minimums start adding at least five dollars. Otherwise, you are only paying the interest, that’s like paying rent on your own money.
Always Pay Your Bills On Time
If remembering to pay to pay on time is part of your problem set up automatic payments. These will only be minimums so you will need to add to them later. This might seem difficult at first, with no credit cards, you will have to either make do or live without.
Pick Your Smallest Debt and Pay It Off First.
Instead of paying the minimum try to double the payments till the balance is zero. Once that debt is paid off apply that amount to of money to the next smallest till it is zero. Move up the line until you are totally debt free.
Signing with a credit monitoring site, like Credit Karma, will help you keep track of your progress. As you watch your debt go down and your FICO score goes up it will seem worth the sacrifice.
Keep Accounts Open.
Don’t close accounts once they are at zero. This will increase your available credit.
Don’t be Afraid to Ask For Help
Contact your creditors and ask for a lower interest rate, or make other arrangements. They want you to pay and will appreciate your honesty. Credit counselors can help you set up a plan for getting out of debt. They can show you where you got off track, and even call your creditors for you.
Stop Applying For Too Many Credit Cards
You may think a new card will give you more available credit, but not using it may be hard to resist. If you have painted yourself into a corner a second job might be the only way to get out. Getting out of debt is like losing weight. A lot of hard work, but worth it in the end.
How To Raise Your Credit Score in 30 Days
Many debtors wonder, “How can I raise my credit score in 30 days?” It’s quite possible for someone to raise his or her credit score within 30 days by filing disputes and correcting credit report information. The person must first obtain the credit report by visiting the credit bureaus or a credit report provider that releases free annual reports. Once the person receives the report, he or she can file disputes for accounts that do not seem legitimate or correct on their balances. The law obligates the credit bureaus to investigate such matters immediately. They have to resolve the disputes within 30 days. The debtor’s credit score will rise in that time frame if the bureau has to remove a negative account. Credit restoration will begin at that point.
Double-Up on Payments
Doubling up on the payments is an excellent credit restoration solution for people who wonder, “How can I fix my credit score quickly.” Creditors report payments to the credit bureaus at least once a month. The overall balances decrease as the creditors post the payments. One large payment can make a credit score jump several points. Therefore, the debtor should try to pay double or more each month to cause a consistent score rise. A few extra points can take someone from one credit score bracket to another rather quickly. That’s credit restoration at its finest.
Cut Down on Inquiries
Credit inquiries can affect a debtor negatively if that person makes too many of them. They can cause creditors to behave hesitantly because they can depict desperation. Additionally, each inquiry can cause the person’s credit score to drop several points. Furthermore, inquiries remain on the credit report for two years, and they are difficult to dispute. The best course of action for credit restoration is to cease inquiries immediately and avoid applying for new credit for at least one year if it’s possible. The old inquiries won’t hold as much weight on the person’s score by that time.
Transfer and Consolidate Debt
Balance transfers and consolidations can boost a credit score, as well. A debtor could apply for a consolidation loan or a balance transfer credit card and achieve the same result. Moving three or more balances to one card or paying them with a loan will cause the score to increase. Additionally, the debtor could receive a lower interest rate on the balance transfer card or consolidation loan. Moreover, having only one monthly payment instead of two or more is an organizational improvement toward credit restoration. The debtor will have less stress that way.
Mix Credit Types
The creditors like to see a mix of credit types, and that mix will boost the debtor’s score. All debtors should have at least one revolving account or credit card on their profile. They should have at least one installment loan, as well. An auto loan and a home loan are good elements to have on a credit report, as well. Such accounts will show that the debtor is responsible and able to pay a variety of debts.
Make Timely Payments
The debtor’s payment history is 30 percent of the overall credit score. Late payments hit hard and can sink someone’s credit score abruptly. Therefore, making timely payments should be the debtor’s priority. The debtor should try to make the monthly payment at least one week before the due date to ensure that the creditor posts it in a timely fashion. All debtors should make every effort to pay their bills on time.
Keep Balances Low
Another trick to boosting a credit score is to keep the balances under a certain amount. Creditors like to see less than 30 percent utilization on each card or account. Going over that 30 percent will cause the person’s credit score to drop. Thus, the score will rise as the utilization number goes down.
Keep Accounts Open for Maturity
A credit score can rise because of maturity. Therefore, the debtor should never close accounts that have been open for long periods. Closing those accounts will affect the maturity level, and that can impact the credit score negatively. It’s best to leave old accounts as they are so that they can enhance the credit profile. Credit restoration will come with maturity.
Most creditors will grant credit line increases at least once every six months. A debtor should take advantage of that and apply for increases to boost the available credit. Available credit increases have the potential to raise the credit score significantly. Boosting overall credit is a smart move that can work as long as the debtor doesn’t use all of that credit right away.
Use a Credit Repair Company
Some people wonder, “Can credit repair companies really fix your credit?” The quick answer to that is yes. The more extensive answer to questions like “How long will it take to repair my credit history?” and “Who is the best credit repair company?” are a little more difficult to answer. Negative items can stay on one’s credit report for seven years or longer depending on the type of account it is. Credit repair companies can help by disputing, negotiating and helping. They can look at a debtor’s profile and come up with a structured payment strategy. Additionally, such people can negotiate for balance decreases dispute some items for the client. The best credit repair companies are the ones who have proven success records, reputable information and positive reviews from the people who used their services before.
What is My FICO Score?
Your FICO score is the number given to you by the credit industry to help businesses know how good a risk you will be when you ask for credit. It is based on a formula that is:
- Payment history 35%
- Amounts owed 30%
- Length of credit history 15%
- New credit 10%
- Types of credit 10%
Having a good mix of credit types helps to improve your credit score. It is better if you have a couple of credit cards, a car loan, a small personal loan, even student loans.