I remember I used to dread being asked what my credit score was because I knew it was bad. You may be reading this and saying yeah, mine is bad too or maybe you don’t know if it is or isn’t but you’re too scared to look. The truth of the matter is that it won’t change until you do something to make it change. I fell head first into the trap that many of us have before I realized that credit is an important component to our financial success. To receive certain opportunities your credit must be in good standing.
Today’s economy runs on credit. If you want to get a mortgage loan for a house, insurance rates, student loan to pay for college, get a job, good interest rates or if you just want to put your lunch on a credit card, a company is extending credit to you. Your creditworthiness is defined by three digits that range from 300-850 and is the key to your financial life.
Credit information as a litmus test to see if the people they are dealing with are reliable and responsible. Bad credit can suggest you’re a risky bet. While bad credit may only show the details of how you handle debt, some will assume that your bad credit implies that you may be just as irresponsible with other things.It’s important to note that repairing bad credit is like losing weight, It takes time and there is no quick way to fix a credit score.
Check your credit report annually (Annualcreditreport.com)
Credit score repair begins with your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau.
Understand how situations effect your credit.
Understand how credit works
FICO breaks that information into five categories. These five components each get different weights. 35 percent of the total credit score is based on a borrower’s payment history, 30 percent of the total credit score is based on a borrower’s credit utilization — that is, the percentage of available credit that has been borrowed, 15 percent of the total credit score is based on the length of time each account has been open and the length of time since the account’s most recent action and New Credit/Credit Mix each comprise 10 percent of the total credit score.
Contact your creditors
This won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO Scores.
Re-establish new lines of credit
Opening new accounts responsibly and paying them off on time will raise your credit score in the long term. In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
Pay your bills on time.
Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.
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