Bad Credit Can Be Repaired... Find Out How
For whatever reason, your credit is bad. Maybe you got a credit card and went hog wild with the freedom of "free" money before realizing the long-term consequences. Perhaps an illness created circumstances where credit was the only way to get you through a hardship. Or you lost a job and had to live on credit for a while without income.
Close to home, my brother was in business for himself for several years but things were not going as he planned. Always thinking things were going to improve the next month, he went from bank to bank opening up credit card after credit card, line of credit after line of credit. His business folded and he found himself seventy thousand dollars in debt.
No matter how you ended up with debt or how insurmountable it may seem, there are ways to repair your credit score without the cost of credit repair services or credit repair legal advice. There are ways to save. It’s possible to source solutions.
Before you can begin to repair your credit, you need to get a clear understanding of your situation. There are several resources to help you learn about your credit score. Credit Sesame and Credit Karma are great tools you should definitely check out. Your credit score determines the loans you're eligible for and the interest rate you pay on them so it's important to understand it in-depth.
As Save Source discussed in our previous post Understanding and Raising Your Credit Score, the most important determiner of your credit score is payment history. Start your reparations by making at least the minimum payments ON TIME. Don’t let accounts go past due.
1. Watch out for late payment errors
Even if you’ve been careful to ensure you make those payments on time, sometimes an error on the other end can impact your credit. Pay attention to when payments are recorded. If you see a recorded payment with a 'Late' status when it was in fact paid on time, dispute it. Even if it’s an old payment on an account that’s closed. Those late payments are still making a mark on your credit history and by disputing them, they can be erased.
2. Be on the lookout for inaccuracies
Once you’ve got that credit report, check for inaccuracies or errors. For instance, if a payment was recorded incorrectly that’s a mark against you on your credit. You can get help disputing them from TransUnion or Experian.
3. Increase your limits
If you’re trying to repair your credit, it may seem counterintuitive to increase your credit limits but as discussed in our article about understanding your credit score, utilization is an important factor in your credit score. Meaning the ratio of credit you have and the credit you use. If you have a limit of $5,000 and you spend $3,000 every month it means you are living close to your limit. If you have a limit of $7,500 and you spend $3,000 you’re using less than half of your available credit.
That’s an automatic improvement on your credit score. The important thing here is ensuring you don’t use any of that extra credit! Your goal is to ultimately bring those balances down to zero and maintain it month after month. Overall, you want to save not spend!
4. Piggy back
My daughter is new to credit and wanted to establish a good score right off the bat. Always one to do her homework, she found out that by adding her name as an authorized user on my card she could get brownie points for herself by piggy backing on my strong record.
If you have a spouse or family member who has a credit card with a great payment history and a negligible balance, as an authorized user, you will automatically benefit from their available credit and history. Obviously DO NOT use the card!
Starting with highest interest loans, my brother has been steadily paying down his debts and repairing his credit. The closer his loan balances were to the original amounts he borrowed the worse it was for his credit. Each one he paid off improved his standing. His credit hasn’t totally been repaired yet, but he is well on his way.
For more helpful articles on saving and repairing credit, check out our other blogs. Save Source is your source for debt resolution solutions. Ask us how we can help by giving us a call at (844) 378-5736