Last updated on May 9th, 2022.
According to FICO’s studies, approximately 11.7% of the US population has a credit score below 550 which is considered to be poor. This means that they need fast credit repair to enjoy a better life quality.
At the other end of the spectrum, less than 1% of Americans have a perfect credit score of 850.
If you’re somewhere in the middle or your credit card rating is very poor, we have good news for you! There are multiple ways you can repair your credit, and you can always work with a credit repair company to fix this problem.
Keep reading to find out a few efficient credit repair strategies.
A credit score represents a numerical representation of a citizen’s creditworthiness. It involves taking into account the credit history, and it reveals if a person is financially trustworthy.
The credit card score shows a number between 300 and 850. The higher the number, the more trustworthy a person is considered to be.
There are numerous reasons why your credit score can drop, such as:
- Paying the bare minimum on credit card bills
- Declaring bankruptcy
- Making late payments
Although having a bad credit score is difficult, it is not the end of the world. A poor credit score can be reversed if one is committed to improving it.
Here are a few steps to repairing your credit:
1. Check Your Credit Reports
There are three major credit bureaus: Experian, Equifax, and TransUnion.
You are entitled to access the information from these credit bureaus for free once a year. The Fair Credit Reporting Act grants you this right by law.
Contrary to the popular belief, checking the credit reports from these bureaus won’t affect your overall score.
You should check the information on all three of these reports because the data can differ. This happens because the credit bureaus rely on receiving information from your creditors. They don’t actively look out for your financial information.
2. Check For Mistakes
Once you have your credit reports, you should check the data for errors. It is important to know that credit bureaus are not obliged to check the data before publishing it in your credit report.
If mistakes occur, you can file disputes with the credit bureau. They are required to modify the credit report if a mistake has been reported.
There are numerous things you can check for when inspecting your credit reports.
For example, misspelled names can negatively impact your score. More complex problems involve identity theft which can drastically bring your credit rating down.
3. Negotiate Lower Interest Rates
This might appear like a difficult step, but there is a chance that your creditors can lend a helping hand.
High-interest rates can decrease your credit rating. You should discuss with your creditors and negotiate lower interest rates to bring your score up.
This might mean you need to take out a loan and use it to pay off a high-interest debt. Some loans can be stretched up to 60 months, ensuring that the interest rates are minimal.
4. Make Use Of Old Credit
There is a tendency to get rid of old credit cards, but this can be a mistake, especially if you have a bad credit score.
15% of your credit rating is represented by the age of your credit accounts. This includes both old and new credit cards.
If you close old credit accounts, you’ll appear as a greater risk to creditors. On the other hand, if you preserve and use old credit cards, you show that you can handle long-term debt and pose a smaller financial risk.
Make sure that you use old credit cards often. It is possible that a credit card issuer will close it if you haven’t used it for a year, so remember to make periodic payments to keep your credit account open.
5. Pay Credit Card Balances
The way you use your credit card can have a huge impact on the credit rating. That’s why you should keep an eye on your current debts and spending habits.
If you carry a high debt on your credit cards each month, your credit score will drop significantly.
One way to fix this problem is to pay credit card balances. Specialists recommend keeping your credit utilization below 30%.
if you have a card with a credit limit of $10,000 and your balance is $4,000, your utilization rate would be $4,000 divided by $10,000 which equals 0.4 or 40%.
By paying down this balance, you can reduce your utilization rate and have your credit score increase.
Furthermore, you can also negotiate with your creditors to increase your credit card limits. Although this might sound complicated, some issuers are willing to offer a soft pull on your credit limit.
As a result, your utilization rate will be adjusted in your advantage, but make sure that you still make efforts to pay down credit balances.
6. Try To Remove A Late Payment
A 30-day late payment can significantly decrease your overall credit score, so if you have one on your credit card, you should try to remove it immediately.
It is not easy to remove a recent late payment, but it is worth a try. For example, you can call your creditors and see if you can negotiate a goodwill adjustment.
If this is not possible, try to agree for automatic payments in exchange for the removal of the late payment. This might work in most cases, but if it doesn’t, you can also dispute the late payment on the basis of inaccuracy.
These fast credit repair strategies can put you on an ascending path when it comes to finances.
It is difficult to push your way through a bad credit rating, but it’s not impossible. Make sure that you read our articles to learn more about credit repair laws for beginners and how to find a financial solution to your problem.