A bad credit score can hold you back from buying a car or a home. It can also cause you to pay higher interest rates.
There are several ways to fix your bad credit, from paying off delinquent accounts to disputing errors on your credit report. Here are four steps you can take to improve your credit score:.
Paying Off Delinquent Accounts
Getting a credit card, loan or other account delinquent has serious consequences for your credit score. Even a single missed payment can cause a financial institution to report that account as delinquent to credit bureaus. A few months of late payments can also cause debt to be “charged off” or “collected,” both of which severely reduce a credit score.
Fortunately, you can often repair the damage caused by these blemishes on your credit report by paying off what is owed and bringing your accounts current. One of the most effective techniques for bad credit fixing is to set your recurring bills on autopay so you’re never more than a day or two late.
Depending on the type of account and how serious the delinquency was, accurate negative information may remain on your credit report for up to seven years from the original date that it went delinquent. However, paying off the debt can help improve your score, as long as you don’t take on new debt in the meantime.
Getting Erroneous Information Removed
A credit repair company helps you remove incorrect information from your credit report, such as accounts that don’t belong to you, missed payments that were actually made on time and inaccurate account balances. They typically charge a fee to review your reports and negotiate with the credit bureaus on your behalf. They may also offer financial counseling or place you in a debt management plan free of charge. However, avoid companies that promise to get accurate but negative entries removed from your credit report, as they’re likely scams.
Errors on credit reports happen more often than you might think, so it’s a good idea to check your Experian, Equifax and TransUnion reports at least once a year to look for mistakes that could be dragging your score down unnecessarily. Dispute any errors you find with the credit reporting agencies, as federal law requires them to investigate your dispute and remove any information they can’t verify.
Rebuilding Your Credit History
Using the technique of disputing errors on your credit report and paying down debt, you can reshape your credit history to make it more positive. However, it’s important to keep in mind that this is a process and will take time.
It takes at least a year to improve your credit score to fair, though it could take longer depending on how bad it was and the moves you make going forward. If you’re planning to apply for a mortgage or car loan in the near future, it’s worth taking steps to fix your credit now so that you can qualify more easily and get better terms.
Paying your bills on time and keeping credit utilization under 30% are other solid ways to boost your credit score. Make sure to check your own credit reports often so that you can monitor progress and spot problems immediately. Check your Experian credit score and report for free.
Monitoring Your Credit Score
If you want to improve your credit score, it’s best to keep an eye on it. Credit monitoring services will alert you of changes to your report that may be the result of unauthorized activity, such as fraudulent accounts or inaccurate payment history.
Using this technique can save you from getting rejected when applying for loans and credit cards. However, it isn’t a replacement for paying off delinquent debts and keeping your credit utilization low.
Also, it is best to avoid credit monitoring services that offer free credit scores since most of them use hard inquiries in order to provide you with your score. These can drop your score by one to five points. This is because each time a creditor runs a hard inquiry, it will update your credit report and lower your average account age. It is better to pay for a service that provides you with accurate information and offers you the option of disputing errors.
