As stated, bad credit is an unfavorable factor that can affect your credit rating, but learning how to wipe it is very important.
Bad credit affects several aspects of your financial life as it’s seen as a sign of irresponsible borrowing and payment. It could also mean, no loans or credit cards for you and anyone associated with you, much higher interest rates, and even cannot rent an apartment or get a certain job. The good news, however, is that there are several ways to use for cleaning your bad credit and start building a fresh and healthy credit profile.
Get Your Credit Reports
The first thing that one has is to obtain copies of credit reports from the three major bureaus which include Equifax, Experian, and Trans Union. You will need to read through the reports carefully and dispute any information found to be incorrect with the relevant bureaus. Examples of these commonly encountered mistakes are closed accounts that appear to be open, debts that are reported as past due while the debtor paid on time, and unauthorized accounts opened through identity theft. Some errors can be eliminated, which will also help your credit rating to increase instantly.
Pay Down Balances
Credit utilization is perhaps one of the most important indicators and it refers to the amount of credit that you use as compared to the amount of credit available to you. This lets you know how much of your total credit limit you are utilizing on your credit card. While this is impermissible, it is advisable to keep one's balance below 30% of the credit limits on the cards. The good thing is that paying down these balances decreases your utilization and can positively impact your credit score in the long run. What is needed is to concentrate on the cards that are nearly charged to the limit.
I will then appeal to Creditors to make further goodwill deletions.
Negative marks such as late payments, collections accounts, or any other bad remarks that are reported on your credit, you can request the original creditor to have them changed or deleted. This is referred to as the goodwill deletion. Sometimes, it does not pay off, but it is still worth doing so politely, especially when the delayed payments were due to some complications like illness or loss of a job. Negative items can be deleted to erase your credit history if handled carefully to avoid portraying a bad side.
Negotiate Pay for Delete
Outstanding collections accounts can be worked out to be deleted provided that you pay for them within the agreed time of deletion. This is known as ‘pay for delete’ Ensure that any agreement for removal is arrived at in writing from the collections agency or creditor before they are paid. Be aware that unpaid collections will fall off 7 years after the Fair Credit Reporting Act.
Become an Authorized User
You can easily improve your credit history in a relatively short time if you receive an official invitation and become an additional cardholder of the credit card of a family member or a lover with a good credit history and low credit utilization ratio. When you are an authorized user, ALL the information from the primary cardholder’s payment history shows up in your credit reports, and it boosts your credit score. The only thing is that you usually don’t have any charges to pay on the account.
Limit New Credit Applications
As one tries to rebuild credit, it can be particularly enticing to open as many credit accounts as possible to boost the credit limit. That being said, every new application results in a hard inquiry on your report which in turn will slightly decrease your score. It is advised that one should refrain from opening more than one credit card every six months while one is trying to improve on the credit score. New accounts and inquiries are a concern to lenders because it may show that many of them are opening too many accounts.
Use Secured Credit Cards
If your credit rating is a low one and you cannot obtain an unsecured credit card, you should have a secured credit card. These come with a cash deposit option that must be paid as security to the amount of credit limit offered by the credit card. The deposit also works to cover the issuer’s position if you do not make the payment. A secured card enables one to build a strong credit record so that the holder can apply for an unsecured one. Do not exceed the credit limit on this card and ensure that you make the monthly installment payments on time and in full.
Become an Authorized User
To establish a good credit history, you may ask your close associates, such as a family member or a fiancé, to add you as an authorized user to their credit card account, and ideally, this individual should have pretty good credit and low credit utilization rates. Since you become an authorized user, the credit record of the primary cardholder, including payment history, is reported to the credit bureaus thus improving your credit rating. But you are normally not liable to be charged on the account.
Limit New Credit Applications
But when you are working to restore your credit score, applying for lots of new ones to raise the number of available credits is good. However, every new application results in a hard inquiry on the credit report, which impacts the score minimally at first. It is advised that people should refrain from opening more than one credit card account in a space of six months while building their credit. The high frequency of new accounts and inquiries is indicative of loan default to lenders.
Use Secured Credit Cards
If you have bad credit and you are unable to obtain any unsecured card, you should then opt for a secured credit card. these need the cash down payment before opening of the account in proportion to the credit limit. The deposit serves as a security for non-payment in case the issuer fails to make his or her payment. It is possible to have a secured card to show creditworthy behavior so that one can qualify for an unsecured card. The card should be used wisely and the monthly balance should be paid without defaulting on the payment date.
Leverage Credit Builder Loans
Like secured cards, credit builder loans also help you to build your credit history by paying regularly on credit reports. To the borrower, the lender deposits the loan amount in a savings account and reports to the credit bureaus monthly payments. Once the tenure of the loan is over, one is allowed to access the balance of the savings account. You should know that this payment is usually reflected in all three credit reference agencies.
Wait for negative marks to age
Typically, 95% of negative credit information can be removed from your credit reports within 7 years in compliance with the FCRA rules except for Chapter 7 or Chapter 13 bankruptcies. Another is that you may think it is better to just ignore those and let them become old closed collections or delinquent accounts instead of paying or negotiating to get them removed. They decline with time as one also establishes a good payment history in the credit marketplace.
Regularly Check Credit Reports
You do not forget to review the three credit reports at least three to four times a year even if you are no longer in this or that credit blacklist. It is important to challenge any errors in good time to avoid seeing them bring down your score. One can also do this to ensure that the reports do not contain any hallmarks of fraud or identity theft. It is critical to keep tabs on your credit so that you do not ruin your credit for a very long time.
Establishing a good credit history requires a great deal of effort and time but having a good credit standing has its benefits when it comes to flexibility in terms of credit accessibility. Applying the following processes can assist you get out of the bad credit bracket by removing the negative entries and increasing positive records on credit reports. One can always correct some of the credit mistakes that they had made in the past if only they will not be discouraged.
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