Recent research and surveys reveal that more than a third of the population of the United States of America has bad credit, with scores below 670. Credit tracking is a very important factor that most companies consider when issuing out credit products like loans, credit cards, and mortgages among others Upon checking and finding that your credit score is low, it is however possible to rebuild your credit within several months or even a year with patience and discipline. In this post, we explore the various strategies that are most efficient for correcting a bad credit rating.
Check Your Credit Reports
The first thing that should be done when seeking to repair credit is ensuring you get copies of credit reports from the three main credit reporting agencies, Equifax, Experian, and TransUnion. Go through the reports critically to examine potential errors or issues that can be affecting your score adversely. Write to the respective credit bureaus to challenge the issues on the credit report with proof to have them deleted. This in turn helps in raising your score. Further, ensure that the personal information of the persons named in the reports is accurate.
Pay Down Existing Debt
If you have a high balance on credit cards or loans, use your extra cash to pay off the debts as much as possible. It is important not to exceed the credit utilization rate of 30% of the total credit limit harms credits. The credit utilization ratio goes down as you pay off more of the credit, thus increasing your credit score within a very short period. To participate more effectively, make a payment greater than that required on the minimum and make the payment a couple of days before the due date. As the case may be, secure other sources of income such as temporary jobs or freelance work to ensure timely payment of debts.
Become an Authorized User
One way to benefit from someone else’s good credit history is to get added as an authorized user to the credit card, that the person has been using longest. Normally, information on authorized users is reported by the card issuers to the credit bureaus. The credit history of the primary account holder will begin reflecting on your credit report, thus enabling you to get a head start on credit repair. Of course, make sure that there is an understanding beforehand so that you end up not being held responsible for going into debt on the account.
You must apply for secured credit cards.
Ideally, those who cannot apply for standard credit cards because of poor credit history should consider secured cards. There is always a cash deposit that you are needed to provide when opening the card account and this is often equivalent to your credit limit. Transactions involving charges, payments, or usage of the card are also forwarded to the credit bureaus to be processed like any other card. Credco and Postrel have noted that it is possible to significantly increase your score over time by using secured cards responsibly for six to twelve months. As long as it’s a secured card and doesn’t come with monthly or yearly charges, costs shouldn’t be an issue.
Limit New Credit Applications
New credit accounts can be very useful, but when applying for them in turn, this can act against them. It can lead to a hard inquiry on the report and a lower credit age, which is the average age of all accounts on the report. Avoid flooding the organization with new applications at a rate that is more than one application every 6 months. Instead, it is suggested to work more on the overall score improvement by efficiently using open and paid accounts available.
Setup Payment Reminders
Paying less than the due dates can cause a credit rating to significantly drop. Paying bills through email, SMS or apps ensures that the payment is not reported to the credit bureaus in case they are paid late. Pay all your bills at least one week before the due date, so as not to cause any unnecessary problems to your credit repair process.
Raise Credit Limits
To reduce the average credit utilization, you can apply for a credit limit increase on cards or loans that you actively use without defaulting. Approach the lenders to find out whether one can get some insight into credit line increases without having to submit application forms. This thus increases the total available credit at your disposal without necessarily applying for credit.
Dispute Late Payments
If you have a credit account or any loan payment that appeared late or missing because of some reasons such as illness, loss of job, etc you must contact the lenders to send compliance dispute letters. Ensure that you have proper and legal documentation to prove the facts that compelled the delay in payment. If making a convincing argument, they can change the reported payments to be more positive or delete some adverse information that will improve your credit score.
Be Patient
To repair credit, one requires a lot of time, hard work, and perseverance over a long time. Just stick with the credit best practices and keep coming up with them month by month. Never take shortcuts even when pushed to the wall and keep on managing accounts as required. You will observe incrementally gradual and continual growth that will enhance the credit repair process. Thus, in general, it has been established that the majority of individuals should be able to improve their scores up to 700+ within roughly one year of following these strategies, which focus on stepwise credit rebuilding.
This is because, there is always hope in the rebuilding of credits, whenever the progress is checked periodically. It is therefore clear that with utmost determination coupled with proper money management skills, one can raise their credit score from a very bad position to a reasonable position quicker than one can imagine.
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