While once bad credit was a problem that only affected a few, it’s now much more common. While people may know that bad credit affects their ability to own a home or buy a car, they may not know much more about it. By understanding what affects your credit and how to improve your credit score, you’ll be better prepared to repair your financial circumstances.
How to Repair Bad Credit
While some companies may try to promise a quick fix, there’s no shortcut to achieving a better credit score. It’s going to take hard work on your part and an ability to show that you take your financial responsibilities more seriously to get a better credit score. To begin, you should write out a monthly budget to determine where your money is going. This is especially important because you need to ensure you’re not spending more money than you’re making. This can lead to more borrowing and relying on credit to pay your bills is no way to rebuild to a good credit score.
Speaking of bills, it’s also vital to your financial reputation that everything gets paid on time. This is the most defining factor in establishing your credit score, either for better or for worse. To rebuild your credit, you must be able to show that you pay your bills on time and that you don’t fall behind. If you are behind, try to get caught up as soon as possible, even if that means making new payment arrangements.
Consider cautiously borrowing short-term easy installment loans with a solid plan to pay them back according to the agreed upon terms. If paid back in full in accordance with the loan agreement, the result will be a positive account on your credit report. As one can guess, this leads to a higher credit score.
The days of paying off the minimum on your credit card debts are long over, as well. It’s time to begin reducing your debts and that means paying off the principal balance. Reorganize your budget, so you can put extra money towards this debt each month until the entire balance has been paid off. Additionally, resist the temptation to use your credit cards, once they are paid off.
Getting Rid of Negative Information
We all make mistakes, but, when those mistakes affect our credit reports, they can follow us for years to come. Fortunately, the Fair Credit Reporting Act puts a limit on just how long a negative item can remain on your credit report. For most things, that time limit is seven years, but that time limit is affected by your creditors.
In cases of delinquent credit card payments and debts that have been reported to collection agencies, the creditor doesn’t have to immediately report the delinquency. In fact, they have up to seven years to report it, which means that debt may follow you around for a total of 14 years. Once the negative item appears on your credit report, it should only remain there for the seven years and, after that time has expired, it should automatically drop off.
In cases where you feel a mistake has been made, you will have to contact the credit bureau and file a report dispute. This type of dispute can be lodged to correct an erroneously reported debt or to argue that the item should have been removed. In the case of the latter, you’ll need proof of the date on which the debt was first reported, which will help you prove that the seven-year time limit has expired.
While there is no quick fix to bad credit, you can improve your score over time to get the best credit score possible for your circumstances. By not abusing credit and paying your debts in a timely manner, you’ll rebuild a good financial reputation. This will help you when you really need good credit to buy that dream home or get a new car.