- Personal Finance»
- Managing Credit Cards & Payment Options
How To Fix Your Bad Credit Score
Bills stack up fast
How to Repair Your Credit Quickly
Free and Simple Ways to Raise Your Credit Score
Following the economic down turn the world has experienced, many have watched their credit score drop considerably. From unstable loans and high credit interest many people have experienced financial difficulties in these economic times that have artfully described as a recession.
What went wrong
Individuals who have never made a late payment in their lives have lost their homes, credit ratings and credit scores dropped, and in many cases employment. Soon after the housing boom ended in 2006 people who signed up for the ‘creative’ financing that was offered began to feel the pain of their adjusting loans. The answer for many was to refinance. So they did, into another interest only, adjustable loan and some borrowed new money on their loans, up to the perceived home value of the time. When our economy started to slide many people couldn’t afford to pay their bills. By 2010, unemployment was high and many, shocked by the sudden rate changes on their home loans, had their at one time, pristine credit take a dive.
Repairing your Credit
Now we may or may not be recovering slightly (depends on who you talk to, I am keeping my opinion out of it), never the less we can begin to fix what broke a few years ago. Repairing your credit is takes time, especially if you have had a foreclosure or short sale that left you owing large amounts to your bank and either related or unpaid bills caused from unemployment or underemployment.
Time to Fix Your Credit
Now, more than ever, it is necessary to maintain good credit. Negative or bad credit can keep you from having a phone, utilities in your name, securing a place to live; having a bank account and it can even affect your insurance premiums.
There are relatively simple ways to increase your credit score. Here are few ways to maintain and increase your credit score.
What affects your credit score
5 Actions That Can Hurt Your Credit Score
- Inquiries; when you open an account put in an application for a new credit account it generates an inquiry. Too many of these can reduce your credit score.
- Late payments; Late payments, or underpay, even if they are just a few days late can negatively affect your credit rating.
- Unpaid accounts; Bills left unpaid and sent to collections can stay on your credit report, this includes medical bills. Many people believe you can get away with unpaid medical bills, the fact is, and they still affect your score in a negative way.
- Debit to Income ratio; if you carry a high amount of debt in loans and credit lines this will bring down your credit score. Be sure to pay down any loans that you have. Even if you pay regular and timely payments but your credit lines are maxed out this can bring down your credit score.
- Judgments or charge offs; these can take years to clear from your credit report.
Its all about the money
Fix Your Bad Credit
- Go on line and get a copy of your credit reports. There are 3 main credit reporting agencies, Equifax, Expirian, and TransUnion. Check with each one for inaccuracies and contact the reporting agency to fix the problem. At times a bill that has been previously paid may still show unpaid on one or all of your reports.
- Close credit accounts that you no longer use; It be aware that if you have an account that has been open for a long time, and is in good standing, this can affect your score in a positive way. You may want to consider transferring debt from newer cards to the older one and closing the newest card.
- Pay off old bills on your reports; now that you have corrected any discrepancies on your credit reports, begin paying off and outstanding debt. Some companies will negotiate a reduced pay off amount if you are able to pay the balance in full or arrange payments. Don't be afraid to negotiate, they want some sort of payment, and collection agencies are rated by the amount of successful collections they are able to negotiate.
- Credit cards; pay your credit payments regularly and keep the amount you owe less t 50% of your limit, 30 % is ideal. Remember if you inquire about a lower interest rate, when the credit company looks reviews your account they can raise your interest rate just as easily.
- When there is any activity on your credit report it has the potential to drag down your credit score. This includes paying off bills and opening or closing accounts. After the initial dip in your credit score from the activity, if you made any repairs to your credit then you should see a rise in score. Generally this will take at least 60 days.