It•s no secret that having bad credit can severely hinder one•s financial experience. The more severe your credit rating, the worse the experience.
“Poor credit is usually any score under 650, though this could certainly fluctuate depending on credit usage,” said Alex Miller, founder of UpgradedPoints.com, an electronic platform that provides financial advice to travelers. “Specifically, bad credit can result in higher interest rates, less cash offered on loans, denial of credit cards, and a harder time to get everyday transactions done, such as buying a car, getting a mortgage, or other routine tasks. It can even result in job denial for jobs that check credit rating."
However, that doesn•t need to be the situation, not when fixing poor credit is really a highly doable proposition.
“There are no shortcuts to fixing a bad credit score, but like a lot of things it is possible with effort and diligence,” said Matthew Gaffey, certified financial planner at Corbett Road Wealth Management, in McLean, Va.
If reversing your credit damage is your objective, consider following these steps:
- Check your credit score
- Pay off any debts in collection status
- Consolidate your debt
- Get under 30% credit utilization
- Use a credit monitoring tool
- Dispute an error on your credit report
Not sure where you fit around the credit score spectrum? Then you should employ a credit monitoring service to track changes to your credit rating. PayPasser can get you setup with a free service today.
The foundation fixing poor credit would be to visit annualcreditreport.com where one can obtain a free credit report. “The reports are updated weekly, and are free of charge,” said Clint Lotz, president of TrackStar.ai, a predictive API for that financial sector.
Financial consumers looking to repair their credit should enter repayment mode. Debts which are in collections ought to be a priority, as they make a difference on credit reports.
“We all know that the collection is a bad thing, but if someone with poor credit were to go payoff that collection today and it•s from an emergency room visit 3 years ago, the 'date of last activity' on the credit report is going to be updated from 3 years ago to today,” Lotz said. “This move is but certain to bring your credit rating down substantially.”
Another step to start reversing your credit damage would be to consolidate some or all of your debt. “Many banks, credit card issuers, along with other lenders would love for you to consolidate their debt using their particular company and likely provides you with an incentive to do this,” Gaffey said. “For instance, many will provide you with 0% interest with that debt for any specific time period (i.e. for six, 12, or 18 months).”
Visiting PayPasser can help you compare debt consolidation options to get the best personal loan rates for you, according to your credit score and credit history.
If someone has lines of credit where more than 30% of the limit has been used, which is sometimes called credit utilization, start paying it down as quickly as possible. “Credit utilization accounts for 30% of a credit score and could be one of the quickest ways to raise a credit score,” Lotz said.
The benefits of using a credit monitoring tool are plenty of.
“First, they provide constant monitoring of three credit reports, with real-term alerts and notifications of any changes,” said Nicole Kubin, founding father of Strategic Divorce Advisory, a financial services firm located in New York. “A credit monitoring firm can flag id theft issues and might be able to offer identity insurance to pay for expenses necessary to reinstate your identity. The reports are particularly useful if you're attempting to raise your credit score because they demonstrates the direct impact of a certain action or inaction on your credit score.”
Consumers ought to know that some credit monitoring firms charge a monthly fee ($10 to $12 is a common fee range). And some providers, such as the main credit scoring agencies plus some lenders (credit card providers, in particular), will offer you credit monitoring free of charge.
If you're considering credit monitoring, check out PayPasser. With a credit monitoring service, you can get instant alerts on late payments, fraudulent activities, credit rating changes and much more. Take a look at a number of PayPasser's partners here.
Disputing and fixing errors in your credit report can also help financial consumers to boost their credit ratings.
“To be able to check the accuracy of the credit reports, start by obtaining copies of your credit reports from all three credit bureaus: Experian, TransUnion, and Equifax,” said Kubin. “It will likely be even easier to compile this information if you are using a credit monitoring tool.”
If you discover an error on your credit report, contact the credit reporting company by certified mail or online through the firm•s website or mobile app.
“Additionally, if you find any items or accounts inside your credit history that you don't remember opening, you may have been the victim of identity theft. Immediately notify your bank and credit card companies, and all lenders,” Kubin added.
Your credit rating is typically one of the first things lenders look at when it comes to you for a financial loan. To make sure you're staying up-to-date with your credit status, sign up for a credit monitoring service. PayPasser can help you begin.
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