How to repair a bad credit score?

Let’s say the real things: There is no “quick” or instant solution to repair a bad credit, no matter what you read on the internet. Your credit rating reflects financial habits over months, years and even decades – rehabilitation will not happen overnight.

The good news: with a little effort, it’s easy enough to improve your rating and get you back on track for long-term financial health.

If you do not already have it, check your credit rating for free and order a copy of your credit report (you can get a free report a year via Qualtex or SaveUnion) so you know where you are. With all your credit history at your fingertips, it’s time to work.


1. Identify your weaknesses

1. Identify your weaknesses

A cliché frequently attributed to Albert Einstein on the posters of the dormitory, but there is some truth: the definition of madness is to do the same thing over and over again expecting different results. Break the cycle by identifying exactly why you have bad credit. Your follies are probably chronic: excessive spending (do not follow a budget, live from one paycheck to another), have a lot of credit card debt, and / or ignore the due dates of invoices or missing payments . Any “derogatory mark” in your credit report will hurt your rating: bankruptcy, liens or unpaid bills that have been transferred to the collections departments. Be sure to review your credit report for potential errors – if you find any, start the dispute process with the credit bureau as soon as possible.


2. Pay your bills on time

Pay your bills on time

Look at your credit report. How many late payments are listed on your file? At 35%, the payment history is the most important component influencing how your credit rating is calculated. Paying all your bills on time every time is the easiest way to repair and maintain a high credit score, but it’s like hand washing: it’s technically mandatory, and everyone says they do it, but here we are.

If you’re having trouble with excessive spending, it’s time to set up a budget and follow it with an app like Mint, which makes you honest by cataloging every purchase and trip to an ATM. If you have financial difficulties, contact your creditor as soon as you plan to be unable to meet your obligations. Lenders want you to pay them back, so they are often willing to work with you, as long as you tell them before you get to the bottom of the hole.
If you are simply disorganized or distracted, this is the easiest problem to solve: Set up payment reminders via your chosen budgeting app, your calendar by email or phone, or make a list and attach it to your fridge – you must do what is necessary for the good of your financial health in the long term.


3. Check the level of your debts

3. Check the level of your debts

Credit bureaus consider it healthy to have a mix of different types of credit, as long as you master it. Even if you have a mortgage of $ 200,000, it is really considered a “good” debt as long as you make your payments on time (missing a mortgage payment on the other hand, can deduct up to 100 points of your rating). Credit card debt is different – carrying high balances on multiple credit cards signals credit bureaus that you do not control your finances, especially if you can not afford to at least make the minimum monthly payments.

Ideally, if you do not pay your balances in full each month, your credit utilization rate should be less than 30% of your available limit. So, if your credit card limit is $ 5,000, keep your balance below $ 1,500 at any time. It is also better to have a $ 5,000 debt distribution on three credit cards than to have a card full to bursting.


4. Keep an eye on your progress

Keep an eye on your progress

Remember, the change is gradual. It will take at least 30 to 60 days for the changes to begin appearing on your credit report and several months for your rating to begin to rise, depending on the severity of your past transgressions. It can take up to seven years for the priority items to be removed from your report, but the effect they have on your credit rating diminishes over time. The credit scores are calculated on a scale of 300 to 900. Note that it is not so much the exact number of points earned that matter, but under which “range” you fall: very poor, mediocre, fair, good or excellent . As your improved habits adjust, your score will increase.

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