A credit score is an essential three-digit number that helps banks and lenders decide whether or not you’re qualified for a loan. Thus, the higher your credit score, the more likely you’re to get qualified for credit cards and other forms of loans at the most favorable terms.
That said, you should make sure to keep your credits score as high as possible. Generally, a score of 800 to 850 is an excellent rating, while 740 to 799 is considered very good. Furthermore, a score between 739 to 670 is good, and a score under 669 to 580 is fair.
However, if your credit score has dropped between 579 to 300, you’ve got a poor rating and must improve it. If you don’t know how to start, take a cue from the tips below to fix your bad credit score.
Get Your Credit Reports
In fixing your credit score, it’s essential to understand your credit report so that you’ll know where to start. A credit report is an accurate breakdown of your credit history prepared by credit bureaus. It contains personal details, such as the following:
- Number and types of credit accounts
- Borrowed amounts
- How long each credit account has been open
- The amount of available credit used
- The number of recent credit inquiries
- If the bills are paid on time
- Whether you’ve been sued or have filed for bankruptcy.
Thus, a single mistake written on your files can make a huge difference in your credit history and can harm your score. To make sure all your details are correct, you should get and monitor your credit reports regularly. Concerning this, you’re entitled to get your record for free every year from three primary credit reporting companies: Equifax, TransUnion, and Experian.
You may choose to order all three reports at once or request one file at a time. For example, you may get your credit report once every four months to monitor your record throughout the year. However, you can still get additional reports even after you’ve received your annual free credit files. Federal law states that consumer reporting agencies can only charge less than $12.50 for a single credit report.
As mentioned earlier, false information on your credit files can hurt your credit score, and a low credit rating affects your financial position. Thus, you should thoroughly review your credit records, from identity information and credit card lists to outstanding balance and major purchases.
If you see some incorrect information — even the small ones — you shouldn’t let them stay there and drag your score down. The best thing you can do to clean your credit files’ inconsistency is to dispute them to the credit bureau. Here’s what you need to do:
- When you see any mistakes or suspicious items, make a copy of your report and highlight them.
- Next, gather essential documentation, such as bank account statements, as proof.
- Write a letter that explains the mistake and include a copy of your highlighted record along with your documentation to the credit reporting company.
- Be patient and allow time for the investigation. Usually, the process takes less than 30 days.
- Lastly, follow up after the investigation.
But if the process doesn’t resolve your issues and mistakes remain on your record, you can file a complaint with the CFPB or Consumer Financial Protection Bureau. Disputing credit report errors is time-consuming. However, it can be worth the effort if done successfully, helping you fix your bad credit score.
Reduce Your Debt
Another way to fix your bad credit score is to cut your debt by using your savings. Instead of keeping saved money on your account, you can use it as an additional payment for your outstanding loan balance to pay it off as soon as you can. Though it’s a great idea to have a savings account, the thing is, you’ll pay more on loan interest than you’ll earn on your savings with a low base rate.
On top of that, if you use them to pay off your debt, not only will you improve your credit score, but you’ll also have more available credit options. That said, you can use these credit lines in moments where you’d rely on your savings, such as an emergency or something that you’re saving for.
Whether you want to apply for a personal loan, mortgage, or car loan, your credit score is an essential factor to determine if you’ll be qualified or not. That said, you shouldn’t stay put if your score falls under poor rating. You can do the three ways mentioned above to fix your credit score and get qualified for any type of loan with the most favorable terms a bank or lender can offer.