Pro Tips For Overhauling Your Credit Score To New Highs
(DailyDig.com) – Credit scores are relatively new–official implemented in 1989. Today they impact all Americans and everyone who does business here. Unfortunately, without a great credit score, lenders consider you a higher risk and deny you loans or charge you higher (or even predatory) interest rates. Most people fall on hard times at least once in their lives, and if that’s happened to you, you know how hard it can be to improve your credit score after it tanks.
There isn’t a quick way to fix your credit score, though some methods are faster and higher impact than others. Don’t believe any company that advertises a quick fix: they’re just looking to take advantage of you while you’re in a tough situation.
There are two major things you can do to fix your credit score: review your credit report and take action on inaccuracies, then fix your own payment history and credit use ratio.
How Do You Fix Your Credit Score?
Fixing your credit score involves persistence and patience, but here’s a step-by-step guide to getting it done.
Review Your Credit Report
You can’t fix it if you don’t know how bad it is. Chances are, you probably have some things on your credit report that aren’t accurate, such as bills you’ve already paid or some type of fraud you need to act against.
There are three credit reporting agencies: TransUnion, Experian, and Equifax. Mortgage and auto lenders sometimes prefer one over the others, so if you goal is to achieve a car loan or mortgage, ask. Each of these credit bureaus is legally required to provide you with a yearly credit report. You can also access your score regularly on Credit Karma, but it may take official channels longer to update. It is, however, a good guide.
Begin by handling any inaccuracies in the report, or communicating with any collections departments that say you owe money. Review everything for legitimacy.
Fix Payment History and Credit Use Ratio
There are two factors that primarily determine your credit score: credit use ratio and payment history.
Credit Use Ratio
Credit use ratio describes how much revolving credit you have (credit you can use but have not) versus how much you have used. Let’s say you have $10,000 in credit but you’ve only used $5,000. That puts you at 50 percent. However, your goal should be to get your credit use ratio under 30 percent. As you pay credit cards down, your credit use ratio will go down too.
Payment History
Payment history makes up one-third of your total credit. This is one of the first things you should check. While you can’t change whether you made payments on time in the past, you can fix this habit immediately to make sure it isn’t a problem in the future (and you’ll see an immediate increase in your score if this is the case). To raise this factor, make all of your payments on time, especially car loans and mortgages.
Should You Use Credit Repair Companies and Consolidation Loans?
If you have done all you can with what you have, you may want to consider taking out a consolidation loan. This will pay off all your cards and give you just one monthly payment to worry about. We recommend cleaning up your payment history before you consider one for maximum impact; this will also help you get a lower rate on your consolidation loan.
Credit repair agencies are best for people who discover negative marks that aren’t really theirs on their credit report. If this describes your situation, you may need one. Lots of credit repair companies are kind of scammy though, so make sure you research them well and ensure they have a good Better Business Bureau (BBB) rating.
With time and consistency, you’ll be on your way to raising that credit score.
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