Having poor or bad credit and a low credit score can set you up for a wide range of challenges. It can make many essential things difficult, sometimes even impossible. From getting a home loan approval to buying a car or even applying for a credit card, a bad credit score can ruin the chances of any of these.
Fixing your credit score here becomes necessary as better credit can mean qualifying for a mortgage, buying your dream car, lower interest rates, and overall beneficial terms on loans.
If you’re wondering how you can fix your credit score, have some financial freedom, and live your life on better terms, you’re at the right place!
To fix your credit, you can either opt for credit repair companies or do it yourself. But remember, there is nothing a credit repair company can do that you can’t do yourself for little or no expense. A credit repair company is a good idea if you do not have the time to do it yourself.
Plus, the cost of hiring such a firm can be substantial, ranging from hundreds and thousands of dollars. Apart from the price, there are a lot many things that you need to know before hiring a credit repair organization!
Related Post: What should you know before hiring a credit repair company?
Moving on, there is not really a quick way to fix your credit. Details that are negative but valid (like late or missed payments, charge-offs, or collection accounts) will remain on your credit report for seven to ten years!
However, our guide will take you through all the steps and measures you need to take to fix your credit. We will explain ways to improve your credit score and help remove negative information from your report.
Fixing your credit may take time and significant effort, but it is worth it! Once you improve your credit successfully, you’ll find it simpler to get loans, qualify for other commercial products, and live your life with no financial difficulties.
Here are ten steps to fix your credit!
Get the Latest Copy of Your Credit Report
Before you can even begin fixing your credit, you need to understand better your credit report and what lenders can see. After all, without getting a copy of your report in your hands, you won’t have any idea about what needs fixing and how to improve your credit.
Your credit report is filled with all the errors you have made that resulted in bad credit. Go through your credit thoroughly to understand the negative information that significantly affects your credit score.
According to the Fair Credit Reporting Act, you’re eligible to get a free credit report once a year from three major credit bureaus:
You can avail of this yearly free credit report through AnnualCreditReport.com, which Experian, Equifax, and TransUnion run. Annual Credit Report does not provide a FICO Score. The good news is it is not necessary to know your FICO score, but it is a good idea to know where you stand.
More Ways to Get Free Credit Report:
There is another way to get a free credit report from Experian, Equifax, and TransUnion, but in slightly different methods.
- Experian: You can get a free credit report every 30 days at sign-in when you create a new account on Experian.
- Equifax: You can get free access to six extra credit reports every year when you sign up for my Equifax account.
- TransUnion: This credit bureau offers a free credit report or a report at a reduced rate very less frequently. However, you can always get an additional credit report for only $11.50.
On AnnualCreditReport.com, you will be eligible to get a free credit report every week from each of the three major credit bureaus (Experian, Equifax, and TransUnion) through April 2021. You can request all three reports at once, or you can order them one at a time.
Why Does It Make Sense To Order All Three Credit Reports At Once?
Most of the time, some of your lenders and creditors only report to one of the credit reporting agencies. As your credit report is confidential information, the credit bureaus do not share it, making it possible to have different information on each of your reports.
When you order all three reports, you’ll have a complete view of your credit history. These reports may slightly differ from each other, so you’ll be able to fix your credit at all three bureaus.
Check Your Credit Report For Errors
Once you have your credit reports in your hand, review them closely for errors and negative details. If you have a long credit history, your credit reports might be lengthy as well.
It can be a lot to digest if you’re reading your credit report for the first time. Try not to get overwhelmed, as you can finish checking it thoroughly over several days if you need to. It is not necessary to understand all the errors on your reports in a single day!
Figuring Out What Needs Fixing
When you’re reviewing your credit reports, keep your eyes open for:
- Incorrect information; this includes accounts that aren’t yours, wrong personal details (misspellings, wrong address), payments that are reported late incorrectly, etc.
- Missing accounts that must be listed on your credit reports
- Inaccurate accounts (showing active when they’re actually closed)
- Accounts that are listed as “closed by grantor” (it means that the lender closed the account on you)
- Duplicate accounts
- Past due accounts that are late have been sent to collections or charged-off
- Accounts that are maxed out and over the credit limit
- Data management errors
- Incorrect inquiries
- Fraudulent activities
- Derogatory marks or Delinquencies
Any of these errors can significantly affect your credit, and you must fix them as soon as possible. If you find one of such errors in your report, don’t forget to check if the other two reports have it too.
Fixing these simple errors can result in a compelling improvement in your credit standing. Constantly managing your credit and fixing simple errors will provide you with much better results than just sitting back and waiting for your credit to improve automatically.
Dispute Credit Report Errors
Once you have successfully found mistakes and errors on your credit reports, it is time to dispute them.
Remember, you have the right to dispute any information in your credit report that’s incomplete, inaccurate or if you believe it cannot be verified. The bureaus are legally obligated to try and resolve mistakes on your credit reports.
The Best Way to Dispute Errors
There are many ways to dispute errors:
- Online
- Over phone
Disputing errors online is one of the fastest and easiest ways to reach the credit bureaus, but it will leave you with no paper trail (you can always keep screenshots of your dispute). It’s the same thing for making a dispute over a call.
- Experian: Online Dispute, Phone number: 022-66419000, By mail: Experian, P.O. Box 4500, Allen, TX 75013
- Equifax: Online Dispute, Phone Number: 866-349-5191, By mail: Equifax Information Services LLC, P.O. Box 740256, Atlanta, GA 30374-0256
- TransUnion Disputes: Online Dispute, Phone number: 800-916-8800, By mail: TransUnion Consumer Solutions, P.O. Box 2000, Chester, PA 19016-2000
Although disputing your errors through regular email is much more beneficial, you can easily include proofs supporting your dispute (like a canceled cheque). Plus, it also allows you to keep a copy of the dispute letter.
In addition to that, if you send your dispute via mail, you have certified proof of the time you mailed. This is really essential as credit bureaus have 30-45 days to investigate and respond to the dispute you sent.
How to Send a Dispute?
To submit a proper dispute, there are a few things you must keep in mind. First, make sure you include a copy of your credit report in your dispute mail.
Second, highlight the item that you’re disputing in your credit report. At last, prove the bureaus with proper proof that supports your dispute.
If you do not send enough information regarding your dispute, the credit bureaus have the right to decide that your argument is senseless and decline to investigate any further.
But, if your dispute is legitimate, along with proof that supports the legitimacy, the credit bureau will investigate and resolve the errors and mistakes on your credit report in a span of 30 to 45 days.
On the other hand, if the negative details or errors aren’t removed from your credit reports even after a dispute, your credit report will show that you’ve disputed the information, and you’ll have an opportunity to add a personal statement regarding the error.
Personal statements don’t really affect your credit score, but they give additional insight into your dispute when a business manually goes through your credit report.
Deal With Past Due Accounts
As a matter of fact, 35% of your credit score depends on your payment history. This means that your payment history affects your credit score more than any other factor.
Since payment history plays a big role in building a good credit score, several past due accounts on your credit report can drastically hurt your creditworthiness.
Taking care of your past due accounts as soon as possible is essential for fixing your credit. Try getting all your past due accounts to be reported as “paid” or at least “current.”
Here are a few ways you can deal with past due accounts:
- Pay the entire past-due balance: The fastest way to get your account back on track is by making a complete payment that covers your whole past-due balance.
- Slowly catch up on your past-due balance: Sometimes, it is impossible to pay a lump-sum amount covering your entire balance. This may be due to the unavailability of capital or the past-due amount being too big.
You can contact the creditor and negotiate a plan to help you pay the due amount over time in a few monthly payments. Let them know you’re willing to catch up on your due balance, and they might even re-age your account to show your left payments as current instead of a vandal.
- Consolidate your account: Consolidation means that all your debts (including credit card bills or loan payments) are wound up into one monthly payment. Consolidation may be the best way to simplify or lower your payments if you have multiple credit card accounts or loans.
- Settlement: If it seems more than difficult for you to get back on track with your payments, you can try to figure out a settlement plan with your creditor.
In this case, the creditor agrees to accept a lower complete payment (or a few dividend payments) to satisfy the debt account. Make sure you have enough funds when you approach your creditor to settle the account. Once the plan is executed, the “Settled” status will appear on your credit report!
Fix Your Credit by Pulling High Account balances Under Your Limit
Another major factor that has a significant hand on your credit score is credit card utilization. It is a ratio that compares your total debt to your total credit limit, and the higher your credit balances are, the more it hurts your credit.
Credit card companies offer each account holder a credit limit, with a maximum allowance set until you pay off at least some balance. Depending on your credit card and your credit score, your limit may be a few hundred dollars or even a few thousand dollars.
You must always avoid consuming your complete credit limit, as it negatively affects your credit. But in case you have maxed out your credit cards, you must work on paying the balances off slowly. Your credit score will improve when your balances are less than 30% (even better if below 10%).
Loan Balances
Loan balances work the same way as credit card balances. The credit score looks out for your current loan balance as compared to the original loan amount. The closer your current balance is to the total amount borrowed, the more it affects your credit score.
Again, you can fix this by paying off loan balances gradually over time. It is realistic to have a limited amount of capital to put into credit repair every month. This is why you’ll have to prioritize working on your credit card balance first, as it affects 30% of your credit score.
Increase Your Credit Limit
Another way to deal with credit card balances is by increasing your credit limit. You can ask your creditor to do so, and if they grant it, it could improve your credit score exponentially.
How can an increased credit limit improve your score?
Well, your credit usually gets hurt when you use more than 30% of your credit limit. Now imagine you owe $2500 on a card with a $7500 limit, and you get the limit increased to $10000. Your ratio will go from 33.3% to 25% instantly.
But remember, increasing your credit limit can be a risky move. As it can tempt you to make unnecessary purchases and expenses, and you could fall deeper into debt. So, if you don’t like the savvy life and love spending money, avoid getting your limit increased.
Get New Credit
Once you’re done dealing with all the negative appearances on your credit reports, it is time to get positive information added. Getting a new credit card will increase your total credit limit, and an increased limit means a lower credit utilization ratio.
Again, the smaller your credit utilization ratio is, the better is your credit score.
It would be best if you kept these things in mind before getting a new credit card:
- Past negative information can keep you from getting a new card.
- Limit your credit card applications to one (max two) as too many credit inquiries can hurt your credit score, plus the future possibilities of getting approved.
- If you get approved, ensure checking the card’s annual fee and if it is worth it.
- Always remember, you’re getting a new card to increase your overall credit limit, which will positively affect your credit score. Do not fall into more debt.
- Pay balances on time
Ensure you choose beneficial offers, and compare the fees and rates before applying for a new credit card!
Pay Off New/High-Interest Credit Accounts First to Fix Your Credit
Many professionals suggest you pay new and high-interest accounts first to fix bad credit. It will help you increase the length of your credit, which results in an improved credit score over time.
If you have a set capital every month that you want to move forward in repairing your credit, you must sequence your priorities:
- First, focus on paying off the account that suffers from the highest interest rate, like a credit card with a 16% APR, instead of stressing about an account with only 8% APR.
- Second, start dealing with accounts based on their ages. Pay off the newest ones first. In that way, you’ll benefit from an increased average length of credit.
- Then, keep moving forward with the list of your credit accounts according to their ages.
The age of your credit history has a moderate influence on your credit score. If you’ve had a credit card for over ten years, keep it, use it, and pay its bills on time.
Pay Every Bill on Time
Fixing your credit won’t even be a thing if you make sure your payments & bills get paid on time!
So, starting today, do everything you can to always pay your bills on time because even one late payment can negatively affect your score. If you’re facing a financial denial any month, be optimistic about what bills you pay late.
Check through your credit reports and find out what accounts are listed. So in case you’ve to pay late, you can choose an account that doesn’t show on your report. It’ll definitely be reported as late payment by your creditor, but utilities and cell providers may not report it.
Make sure this is a one-time situation, and work hard to avoid late payments in the future. Paying your bills on time is the most important route to good credit.
Authorized Users
Do you have somebody (a close person like your spouse) with little or no balance on their credit card along with a great payment history? You can take advantage of their on-time payments and available credit.
Well, if you do, there is nothing better than joining them as an authorized user, if they agree, of course. By doing that, you’ll automatically benefit from the creditworthiness they built with good payment history and low or no balance at all.
But keep in mind, if they make a late payment, it’ll show up on your credit report as well because you paired with them financially. So, pick your credit card friends wisely!
Related Article: Ultimate DIY Guide To Repair Your Credit!
FAQs on How to Fix Your Credit
Fixing your credit isn’t a hard job, and it won’t really take several months to get your desired results. Just keep these ten steps in mind, follow them with proper attention, and you’ll fix your credit in no time.
Here are a few frequently asked questions you must learn about if you want to fix your credit.
How long does it take to fix your credit?
The time required to fix your credit and the dispute process can vary widely, depending on distinctive factors like:
- The type of negative information on your credit reports
- The age of negative information
- The number of errors and mistakes
- Your initial credit rating before it started falling
Your credit repair process depends largely on the depth of negative history that is dragging your score down. It may be easy to repair if you have one or two late payments, but negative information like charge-offs, bankruptcy, foreclosure, or court judgment may take several years.
Here’s a basic timetable of the credit repair process:
Step 1. Get your credit reports.
Estimated time: Half an hour or one hour
Step 2. Review your credit reports and find out all the negative information and errors, and disputes you can fix.
Estimated Time: 2-4 hours, based on your credit history and the number of errors in your reports.
Step 3. Get the dispute letters ready and gather documentation that’d go along.
Estimated Time: A few hours to up to a week, depending on the credit history
Step 4. Wait for the bureaus to get back to you.
Estimated Time: 30-45 days per dispute.
In general, the credit repair process takes 3 to 6 months, but it can be less if your reports only have a few mistakes to fix.
How to fix a repossession on your credit?
When you finance a car, you can not hold the title to the vehicle until your loan is paid off. According to your auto loan contract terms, your lender has the right to take possession of your car if you fail to pay your monthly minimum payments on time.
A repossession can have a severe impact on your credit score for however long it stays on your reports (mostly seven years). The worst part is, repossession comes with several other negative impacts on your credit:
- Late payments: Whenever you miss a monthly payment, a negative item will show up on your report.
- Collections: If you’re unable to complete your loan balance, your account will be given into the collection department’s hands, which is also a negative item.
- Court Judgements: Unsuccessful collections may result in a court judgment.
Fixing the damage on your credit after repossession takes a lot of time. Mostly, if you pay down your debt, start paying the balances off on time, and be wise about taking new loans, your credit will improve.
The further the repossession goes in time, the less its impact is going to be.
Read our related article: How To Remove A Repossession From Your Credit Report
Can Hackers Fix your Credit?
Yes, hackers can fix your credit, but it isn’t very likely. It’s possible but not easy, as a hacker would need to get access to the bureaus’ systems, make a modification in your report, and then also delete any evidence that the change has been made.
This could easily require months of work to find a security flaw. Although even if you find a great hacker that can do this work quickly, you must think five times before hiring them to fix your credit. You will more than likely get ripped off, either with the money you pay them, or with your identity, OR BOTH! And you could potentially face fraud charges. You will have wasted time and ended up with the same bad credit scores.
Think of the kind of personal information you’ll have to share:
- Name
- Address
- Birthdate
- Account Numbers
- Credit card information
- Social Security numbers
This is like the perfect recipe for someone who works illegally to steal your identity and ruin your credit even more. And there is no way you can step back or report the hacker, as you’re the one who hired them for an illegal job. You do not want to become a victim of identity theft.
There are many credit repair scams out there. If it sounds too good to be true then it probably is. Only hire a reputable credit repair company. Some also offer a free copy of your credit report. You just need to tell them which accounts are accurate items and they will work to remove the negative items that are not accurate.
Which action is least important to maintaining a healthy credit score?
New credit is the action that is least important to maintaining a healthy credit score. It includes the number of credit accounts you recently opened, along with the number of inquiries lenders make when you apply for credit.
Five factors affect your credit score, and each one has a different level of impact. Here is how much these common factors account for your credit score:
- Payment history: accounts for 35% of your credit score.
A great payment history constitutes a great credit score, and even one late payment can affect it.
- Credit Utilization: accounts for 30% of your credit score.
The amount of overall debt that you carry, the ratio of your credit card balances compared to your complete limit, and the relation of loan balances to the original loan amount.
The lesser debt you have, the more it’ll improve your credit score.
- Credit History Age: accounts for 15% of your credit score.
This includes the age of your newest credit account, the age of your oldest credit account, and the average age of all your credit accounts—the longer your credit age, the higher your credit scores.
- Credit Mix: accounts for 10% of your credit score.
Credit accounts fall into two categories, installment accounts and revolving accounts. Having both types of accounts on your credit report is so much better for your score because it simply shows that you have experience managing various credit types.
- The number of Credit inquiries: accounts for 10% of your credit score.
Every single time you submit an application (like a loan application) that requires a credit check, it places an inquiry on your report that shows you’ve made a credit-based application.
One or two inquiries usually do not matter, but several credit inquiries can cost you many points on your credit score, especially in a short period of time.
Summary on How to Fix your credit
The ten steps in this guide on how to fix your credit score are all you need to repair your credit. Follow through the steps efficiently, and you’ll build great credit in no time.
Start by reviewing your credit reports thoroughly to get a sense of where you stand. If you find errors and mistakes, dispute them with the credit bureaus. Then, focus on paying down your credit card and loan balances while making every payment on time.
It may require months or even years for you to fix your credit, but if you’re planning for a home for your family or your dream car, it’s all worth it.
Related Article: Ultimate DIY Guide To Repair Your Credit!
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