Fixing bad credit

Do you have poor credit and want to fix it? Maybe you have decent credit, but want to improve it for future needs. Fixing bad credit and maintaining good credit is very important. And time you apply for a large purchase, especially a home, your credit plays a major factor. You always want your credit score in good standing so there are never any issues when it comes time to buying a home!

Bad Credit

Let’s establish what bad credit actually looks like before we find out how to fix it. Most lenders require a minimum beacon (credit) score of 650. Some will accept a credit score of 600, but typically below that means you will require alternative lending.

What creates bad credit?

Things that contribute to a bad credit score include high balances on credit cards/lines of credit (LOC). Maxing out your credit cards or even worse, going over your limit, will drop your score. Missed payments on anything including credit cards, LOCs, phone bills, mortgages, cars etc. If you miss multiple payments, it will lower your score even more. If you miss so many that your payments are sent to collection, it could be detrimental! Anything sent to collections could take over 2 years to be removed from your credit report. If you have a bankruptcy, your credit will be strongly affected as well. This too could take several years to come off your report.

One thing people do not always think of is how often they have their credit report pulled. Every time you apply for a car loan, bank loan, mortgage, etc., your credit is pulled. If it is pulled too often in a short period of time it can begin to drop your score also. If you are already close to the baseline credit score that is acceptable for lenders, then even a small blemish on your credit could cause you to be declined by a lender.

The more delinquencies on your report, the worse your score will be. This makes checking your spending and credit usage extremely important.

Having limited credit history or none at all can also lead to issues obtaining a loan. If you have no credit history it is hard for lenders to establish how reliable you are at paying debts. Something as simple as a cellphone bill is considered as a trade line for credit companies to track. With no trade lines for them to keep track of they simply can’t give a reliable credit score for you. This may force lenders to decline your request for a loan until they have sufficient credit history.

Raise your credit score

Luckily, it is possible to fix bad credit. You can repair your credit and lift your score by taking some of these steps.

Step 1: Credit Payments

Keep up with your payments! One of the biggest issues people have with their credit is missing their payments. Even having one late payment can drop your score. If you can’t pay off your entire credit debts, at least make sure you do not miss your monthly payment. Repairing bad credit can take a long time, but being consistent with payments will help build it up faster.

Step 2: Credit Utilization

Stay away from high utilization on your credit cards/lines of credit. The COVID-19 pandemic forced a lot of people to rely on credit to get by early on. Credit usage was very high with many people going weeks and months without work due to mass shutdowns. Relying on credit to pay bills, rent, groceries, etc. became normal until things began to reopen. Keeping your credits below 30% of your credit limit will help repair credit faster. Of course you should try and pay off all your debts, but in case you are unable to, maintaining a very low limit is best.

Step 3: Establishing Credit

If you have no credit history, start to develop one. With no trade lines to track you can’t build your credit. It can be easy to get a cellphone and pay it off monthly to build credit. A small credit card that you use and pay monthly is also very helpful. Do not simply apply for a credit card and not use it however. You should use it for small purchases then keep a very small balance on it in order to show some credit utilization. Then just ensure you make monthly payments on time and your credit score and history will start to build.

Step 4: Credit Checks

Avoid too many hard credit checks. A hard credit check happens any time you apply for a loan, credit card, car etc. It is ok to have your credit pulled a few times, but when it happens too often your score will drop. There are many apps that you can use in order to check and monitor your credit score like Borrowell and Credit Karma. Using these will help when it comes time to apply for a loan as you will already have a good idea of your score. These are not always exactly the same as a hard check, but still very close. They are also a great tool for helping you budget and monitor your credit spending.

All of these steps can help you to rebuild your credit and put you in a strong position to obtain a loan. It takes time to fix bad credit, but it is worth it in order to get a more favorable loan. There are always alternative ways to get a loan with bad credit. However, putting yourself in a better position for the future is always best. It is also a good idea to speak with an accredited credit consultant if these steps do not help. Talking to a professional who can help with your finances will make life easier.

If you have good credit, bad credit, or no credit, give me a call to schedule an appointment. I will help you out right now, and in the future to set you up for success! Don’t let bad credit spoil your fun. I can help you find a way to get through those credit issues so that you can start living the life you want today!