There’s not much worse than having bad credit. With bad credit, it can become difficult to receive a loan that is very much needed and can make it challenging to purchase a home or car, along with various other expenses that we now consider a necessity.
Fortunately, however, there is a way to repair your credit score in a relatively short amount of time as long as the right action is taken.
Although many currently suffer from a bad credit score, you don’t have to be one of them and can pull it up within several months by following the steps listed below.
1. Check Your Credit Score
First things first, you need to find out just how bad your credit score actually is by checking it.
Be sure to choose the website that you check your credit score on wisely as choosing the wrong one might lead to a slight drop in your score. However, this is very unlikely, especially if you go with a trusted name that has a reputation for being reliable.
In order to know whether or not your credit score is good, you need to have an understanding of how the scoring works. The scoring system ranges from 300 to 850, and the higher the score the better. Any score that is above 740 is considered to be very good and means you are likely to not face any difficulty getting a loan. A score that ranges from 580 to 739 is considered average to slightly above average. With a score in this range, you should be able to receive most loans without too much difficulty.
However, a score that drops below 580 is considered problematic by most loan services and may result in you not getting a loan.
2. Determine Why Your Score Is Low
After checking your credit score, the next step on the road to recovery is to gain an understanding as to why your score is actually low. In some cases, the low score can easily be attributed to a mistake found on your record or fraudulent activity.
In the event there is a mistake on your record, you can dispute the credit report error. Be sure to begin the dispute process as quickly as possible since the process can take a while to complete. However, eliminating any mistakes found on your credit report can result in a quick rise to your credit score without having to go through much trouble at all.
If you’ve simply struggled to pay back loans on time and there aren’t any mistakes on your report, then you may have to put in a little more effort to raise your score, and we provide ways to do just that below. Be sure to highlight all of the current debt that you have, ranking them from the most important to least important.
3. Begin Making Payments on Time
The next step – and arguably the most important one – is to begin making payments on time. The main reason people suffer from poor credit score is because they failed to pay off their loan on time each month, making it look as if they are unreliable in the eyes of future loan services that they may come across.
Therefore, the best way to repair your credit score is to simply stop paying late and begin paying on time. Now, I understand it’s far easier said than done. However, with the right financial planning, you can create a budget that works for you no matter your income level.
In the event your expenses and debt simply outweigh your income level, you may need to find an extra source of income. In some instances, you can negotiate with your loan provider to receive a more affordable monthly payment or even cease payments until you are in a better financial situation, especially if the source of your debt is student loans.
Once your budget is in order, begin making timely payments without missing a single one.
4. Get a Credit Card
It may sound like the complete opposite of what you should do, but getting a credit card after you begin to pay your debt on time is a fantastic way to raise your credit score. Of course, you have to make sure you pay everything back on time with the credit card as well.
The best way to utilize a credit card to raise your credit score is to charge small amounts to the card each month and pay the charge off in a very timely manner. In the event you simply can’t afford a credit card, then be sure to skip this step as not following through can result in your credit score getting worse.
Also, the credit card you choose matters. While there are credit cards that simply don’t work well when attempting to raise bad credit, using one of the best credit cards for bad credit allows you to quickly bring your credit score up with very little effort.
As with all credit, be sure to pay it off in a timely manner or else this strategy can backfire.
5. Pay Off Past Due Accounts
After beginning to make payments in a timely manner and using a credit card in a responsible manner, the next and last step is to pay off all past due accounts you may have.
While you can certainly do this slowly over time, the quicker you catch up on all late activity the faster you are going to see your credit score rise. In order to do this, it’s best to not only begin paying on time, but paying more than is necessary in an effort to catch up. Another great way to pay off past due accounts is to create a savings fund using an automatic bank transfer, which means parts of your paycheck each month goes into a savings fund instead of checking.
After you have saved enough money to pay off past due accounts, do so and you should see your credit score begin to rise rather quickly.
If you have any experience repairing a bad credit score, leave a comment with your thoughts, and share any helpful advice you may have in the section below.