Bad credit can be annoying. I was rejected for a credit card and it was upsetting. It denies equal opportunities to access something like credit, a dwelling, or even a credit card. The good news is, though, that, unlike the situation when one cannot build credit from scratch, one can indeed rebuild credit and open up new opportunities.
Below is a list of the measures that should be taken to correct bad credit:
1. Review Your Credit Reports
The first step is to obtain copies of your credit reports so that you can look at them with a view of seeing mistakes. From AnnualCreditReport.com, you can obtain your reports for free once a year if you prefer not to go through the bureaus. In detail, go through every report and try to identify any issues such as some unfamiliar accounts, incorrect balance, etc.
On the off chance that you locate any mistakes, they challenge these with the credit bureaus. It is recommended to bring any documents that formalize a certain operation, for example, bank statements or billing records with the correct information. The credit bureaus have 30 days to investigate the dispute, and if found correct, it will be removed from the credit reports. They have to delete the wrong details from your reports if it is affirmed that the information was incorrect.
2. Pay Down Balances
A key driver of your credit scores is the level of credit used compared to the total capacity available, commonly known as credit utilization. This is because high balances reflect a poor ability to manage your credit lines hence negatively affecting your score.
Ideally, it is recommended that your average credit utilization should not exceed 30% or less. The impact of balance on credit score runs high and that is why paying down balances can help increase your scores immediately. it will be wise to focus on maxed-out cards as this may sound like a risk to the lenders. When buying you pay more than the minimum so that you make some progress in paying down the balances.
It can also be requested by issuers to increase the credit limit to reduce credit utilization. There is just one thing that should not be undertaken after getting credit and that is- don’t raise your spending.
3. Bring Accounts Current
The actual payment timings affect credit a lot; therefore, all delinquent accounts have to be brought up to date. Try to talk to all the creditors you owe money to determine whether they can offer a more extended and cheaper way to pay back the debt.
In case you have more than one late account, it is recommended to begin from the most recent delinquency and progress backward. Eliminating newer late payments assists more in contrast to older ones most likely already reported. It is not necessary to have a long record of on-time payments, just a couple of the most recent ones can be helpful.
4. Settle Collection Accounts
If there is one thing that both late payments and collection accounts do to your credit, it is to trash it. Always seek to pay the collection agency accounts in full and make sure that they agree to delete the records. This in turn can help to increase your score to a great extent.
In case you are unable to part with full payment, most of the agencies will allow for part payment. Whenever you are receiving a settlement offer or negotiating an agreement to delete, make sure you do it in writing before parting with any cash. Just make sure you keep copies in case it is not successfully erased. Challenge it if that occurs, however, it is improbable to happen.
5. Limit New Credit Applications
Credit building might lead people to open new lines of credit such as credit cards and financing, but it is advisable not to do this. Still, every single application results in a complicated inquiry on your report which reduces the score by some points. When numerous requests are made within a given period, alarm bells start ringing as far as risk is concerned.
But for the initial stages, the emphasis should be placed on building up the accounts which are already established, by paying the money back on time. The scores will begin to come up after 6-12 months, allowing approvals of your scores. Only ask for new credit sparingly and responsibly.
6. Become an Authorized User
It is also advisable to get someone, preferably a family member or a friend with a good credit rating, to provide you with an authorized user status on any of their old and reputable credit card. In other words, while being an authorized user, the account history of the primary user is included in your reports and will benefit your scores as long as it is a good history.
But then again, just be careful for you take responsibility as an authorized user of the credit card. Ensure timely payment is made on any invoice or bill. Furthermore, some primary users may make some payments late in the AU’s name and still receive the credit.
7. Dispute Inaccurate Information
While doing research and double checking your credit reports, you can easily find that new and wrong information may appear from time to time due to identity theft or mistakes of creditors. The consumer credit reporting agencies offer free credit reports and you must take a few months for a check.
To help protect your rights under this act, if you find any new inaccurate information, you should contact the credit bureaus and dispute them immediately. Give details of why the information is wrong, including work papers or any evidence that you can present. This can spare your score from dings that can be very damaging to your credit report. It is also important that one should be always on the lookout for disputes when it comes to credit repair.
8. Build New Credit
As outlined above, steps help improve the credit situation and when the credit score has been raised, it is good to open new accounts sparingly. It is recommended that one go for secured credit cards that request a cash deposit or become an authorized user first because the credit risk is lower than that of a primary cardholder.
Thus, once you have built up your new credit profile through on-time monthly payments for about six months or as soon as your credit limit is re-established, you can then apply for new unsecured credit cards preferably, with the bank that has the first bite. It is always better to build a mix of positive credit history as this helps a lot in coming up with a good score. But just remember not to borrow too much so that you won’t be able to pay back on time.
The Key Above Rock and Key is Patience and Diligence
It is important to understand that fixing any credit, especially if it is bad, is not a process that can be accomplished in a short amount of time. Like I said before, most bad information lasts for 7 years in your reports. It is also important to know that this information takes time to age meaning that if you are now behaving positively on your credit facilities then it will have little effect. Just maintain concentration on those outlined steps above. By exercising a good approach and practicing proper financial management, it is possible to repair even severely damaged credit.
It takes 6-12 months to see your credit score start improving but it should be done correctly to avoid compromising your credit score. Crediting scores are relative scoring with the newest credit information being valued more than the earlier information. The score can increase by hundreds of points within a few years depending on the continued responsible behavior. Do not be discouraged though and think that you are not making progress as it may take a while to progress at first. Persistence pays off.
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