No Score Too Low — These Tips Can Put Almost Anyone’s Credit Back On Track
(UnitedHeadlines.com) – In today’s world credit is everything. Unfortunately in many cases, you need credit to build credit. If you have bad credit, don’t worry. You’re not alone, and the fight is far from over. Fixing your credit can be very difficult, but it’s not impossible. Here are some steps to take.
Step 1: Obtain a Copy of Your Credit Report
First and foremost, you’re going to need a copy of your most recent credit report. If you’re wondering why, you need the report to ensure there are no errors and to see if there are any negative marks on your report. You can get a report from one of the three Credit Bureaus: Transunion, Experian and Equifax.
Thanks to the Fair Credit Reporting Act, people can obtain a free credit report once per year. You can purchase reports from each bureau between waiting times as well.
Step 2: Correct Errors
Once you have a copy of your report, the next step is to go through it. Note any errors and correct them. Inaccuracies on a credit report are rare, but they do happen. If you find one on your report, you can file a dispute with each of the applicable credit bureaus. In the event that a dispute doesn’t resolve the error, you can take legal action to have it removed.
Typically, you can handle little issues on your report yourself via disputes. However, leave the more serious matters, such as a stolen identity, to professionals.
Step 3: Build Good History and Keep Accounts in Good Standing
The better your accounts look, the better your score will look. But having even one late payment can set back your score significantly. Do your best to avoid missed or late payments as they can linger on your report for up to seven years.
Keep in mind that a good mix of accounts will also promote a healthy report and therefore a healthy score. Balance your accounts between installment accounts, such as auto and mortgage loans, and revolving accounts, such as credit cards and other lines of credit.
Also, be sure to not apply for too much credit or too many accounts at once; it will only damage your score. Instead, you should shop around for the best rates concerning the type of credit you’re trying to get. Then, hold off on getting anything new for at least a couple of months.
Step 4: Maintain a Good Credit Card Utilization Rate
Credit Card Utilization (CCU) rates, or percentages, can seriously impact your score. Generally, the lower your CCU, the better off you’ll be. Avoid going over 30% of your available credit for a card. For example, if a card has a $1,000 limit, don’t spend more than $300 throughout each month. Be sure to keep your monthly balance below the 30% mark.
Step 5: Work on Building New Credit
Build from what you have by asking for larger credit limits, when possible. If you have a troubled credit score and history, you can look into a secured credit card. This type of card requires a security deposit, which will serve as your credit limit. For example, if a card requires a minimum deposit of $200, your credit limit will be $200. Keep in mind that the longer you have a credit history with any given company, the better your credit score will be as well, so don’t close any accounts you do have, even if you owe a lot on them.
If you find collections accounts negatively impacting your score, which they almost always will, be sure to resolve the account as quickly as possible. You can generally take action through a dispute, settling for less or paying the balance in full. Optionally, you can leave collections accounts alone, but they will hurt your score and report for up to seven years.
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