A few years ago I pulled my credit report and ordered my triple credit scores. What I saw literally shocked me. My credit score was pretty bad…and I don’t mean 10 points way from 700 bad either. I was in need of some major credit repair…or a cosigner…or both. Luckily for me, I decided that I was going to fix my credit and I had the patience to do it the hard way.
The reason that my score fell so low was because of the same reasons that many others do. I didn’t pay too much attention to it. There were no active credit cards, a mortgage, or any other major purchases in my name at the time. So I buckled down and did lots of research. Then I marked up my credit reports like a freshly graded college paper and got to work. At first, I learned through trial and error— but along the way, I discovered what worked. Before long I’d increased my score by 200 points…and that’s just the beginning.
Here’s how you can do the same:
Collect Your Credit Reports
The first step in any credit repair process is to pull your credit reports. It’s a little easier to fix your credit if you know exactly what you’re dealing with. Many people don’t realize that there are over 25 different credit reporting agencies. However, there are three more commonly known ones that consumers can use to dispute, fix or clean up their credit reports. These companies are Experian, TransUnion, and Equifax. You can get a copy of your reports for a one-time payment from each issuer. You will also find that some companies offer a subscription service that includes all three reports with your credit scores attached.
Check for Errors
Credit reporting errors account for more than twenty-five percent of denials and can have an adverse effect on your overall credit health. Applying for something as basic as a credit card or cellular account with your preferred carrier can trigger credit inquiries across multiple agencies. Also, if you have even the slightest error such as a misreported late pay, open account that’s noted as closed, or an incorrect address, these can wreak havoc on your approval. So it’s essential to check your report at least twice per year.
Start With A Secured Card
Being new to establishing credit can be stressful. How can you build a credit history if you don’t have any credit to show your worth? Lenders are less likely to take a chance on people who they can’t gauge as being reliable. That’s where getting a secured card comes in. There are a few lenders that are known for helping you establish credit with an up-front deposit. Many will let you open a card with a deposit between $200 and $1000. Once you have established a good track record then you can often get an unsecured card as well.
Set A Monthly Payoff Schedule
Paying off your credit cards every month is a lot like paying your regular monthly bills. You set a budget, decide how much you can pay towards the balance, and voila. It can take a little bit of time to get used to paying a credit card if you have never had one before. But, as you get in the habit of only spending what you can afford, it will become second nature. However, it’s worth mentioning that if you find yourself in a financial bind, most companies will let you pay just the minimum balance that month until you are able to catch up.
Add New Cards Slowly
Generally, it takes a new account about six months to build core credibility and positive payment history. This is also a decent amount of time to have developed a habit of balancing your budget as well as figuring out your monthly card spend. Now that you have an established track record you will likely be flooded with new offers. An important thing to remember though, is to take those offers with caution. It’s okay to add one new card or two over the next couple of years . This is a great way to increase your credit score gradually. Just be careful not to get into the “gotta have it now” trap or you can push yourself into a mountain of debt.
Pay Your Bills On Time
One of the most important things to do when it comes to improving or rebuilding your credit sore is to make on-time payments. Not only is it more expensive to pay your bill late, but each day you carry an unpaid balance, the debt accumulates interest. And compound interest is one of the worst kinds to have. It’s like a snowball that keeps multiplying. Once that ball gets rolling, it’s pretty difficult to stop it. Having an on-time payment history is also one of predominant the factors in determining a credit score. So be sure the make those dollars count.
At the end of the day, credit is something that you have to have. Having a less than stellar credit score is nothing to be ashamed about. Everybody has to start somewhere. I used the tips shared with you today to get my credit back in shape. By being dilligent and sticking to a plan you can do the same.