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Fix Bad Credit and Raise Your Credit Score
What Lowers Credit Score
In most cases, you know why you have bad credit, but there are some cases, were credit in general is just highly confusing, so you may not be sure why your credit is low.
If you're just not quite sure why you're credit is low, you're in the right spot because there are actually a lot of factors that can potentially cause your credit score to be low.
There are many factors that can potentially lower your credit score to include:
- Late payments
- Innaccurate information on your credit report
- A credit history of less than 3 years
- Few types of credit
- Small margin of available credit
- Many credit inquiries
Although, these may be little things (except foreclosure and bankruptcy), but over time these factors can add up, especially if you're looking having 10 to 240 points taken off the top of your credit score on one factor alone. For example:
- 10-45 points if you max out your credit card
- 60-110 points if you are 30 days late paying a bill that has been reported to the credit bureau
- 45-125 points if you settle a debt or make an arrangement t pay a debt, but you don't pay it in full
- 85-160 points if you go through a foreclosure
- 130-240 points if you file for bankruptcy
You want to fix your credit score so that when you actually need credit, you can apply for it, and be approved.
Fix Bad Credit
In order to fix your credit, you need to know what's on your credit report. Definitely sign up for a trial subscription to freecreditreport.com or some other entity to have your credit history pulled. If you know that you have bad credit and you're working on raising your credit score, I'd actually recommend keeping the subscription until you're able to bring your credit score up, as you'll be able to keep an eye on your credit. Also, if you end up disputing charged on your credit history, you'll want to keep the subscription open until the charges are removed, which may take up to 60 days. If you just want an idea, then cancel the subscription before you're actually charged.
Depending on how serious your credit really is, it may take a good bit of time to fix your credit history. The first thing that you can do is take care of any late payments, start paying on your credit cards, dispute anything that you don't feel is rightfully yours, and pay anything that you have in collections that is yours.
In order to fix your credit, consider some of the following suggestions so that you can work on raising your credit score.
- Dispute inaccurate information: If you feel like there are charges on your credit report that aren't yours, get them removed. Dispute the charges by writing the particular agency a letter. They have 30 days to respond to the dispute, and if they can't verify that the charges are yours, they will have it removed from your credit history.
- Late payments over 30 days: You can dispute late payments just like you would dispute inaccurate information on your credit. If the credit bureau can't verify that the payment was 30 days late or more, then the information has to be removed.
- Serious credit problems: If you have judgment, bankruptcy, or foreclosure in your past, then it's in your best interest to seek a non-profit credit counselor or attorney who specializes in credit repair. Sometimes you can have the information removed, but it will still stain your credit for 7 to 15 years depending on the blemish. For example, paying off a judgment will remain for at least 10 years; a foreclosure will remain for 7 years; bankruptcy will remain for 10 years; tax liens will stay for 5 to 7 years. After that period, the blemish may remain on your credit report, but you can aggressively go after agencies to have it removed once you've taken care of it
Repair Your Credit Score
You want to make sure that everything you do can positively impact your credit. If you've been working really hard to raise your credit score, you want to make sure that you can maintain and even raise it higher. If you are trying to increase your bad credit score, these factors will help you on a long-term basis.
- Credit Cards: Do not close credit cards even if you don't use them. Just cut them up and throw them away. When you close credit accounts, it can actually negatively impact your credit. When you leave the old accounts open, it can potentially increase the available credit and lengthen the age of your credit, both factors can increase your credit score.
- Pay Bills on Time: It's very important that you pay your bills on time. If you have anything overdue, it will definitely look poorly on you, especially if it is over 30 days past due.
- Keep A Cushion: It's a good idea to keep a decent cushion between your current credit balance and your credit limit. The cushion will show that you aren't as likely to over-extend yourself. Try to keep your overall balance less than half of your overall credit limit; if you go over the halfway mark, try to keep it under an extended period.
- Multiple Major Credit Cards: Try to keep at least two different major credit cards- Discover, American Express, MasterCard, or VISA. This will show other lenders that you're a responsible borrower.
- Multiple Types of Credit: Because there are different types of credit that you can obtain, they each affect your credit, and it can be a good thing to have different types of credit- general credit card, retail credit card, an installment loan, or a real estate loan (in order from least valuable to your credit report to most valuable).
- Aged Credit History: It looks good if you have a longer credit history. It's best to have a credit history of at least three years, which is why it can be important not to close any old credit cards that you don't use or plan to use. Having a longer credit history will give you the appearance of a stable borrower.