One of the best ways for you to save money is to have a good credit score. By having good credit, you might get a lower interest rate on any loans you may need. It can also help you get better rates on any credit cards you will apply for.
But, what if you have bad a bad credit score? Learn how to fix your bad credit score:
HOW TO FIX A BAD CREDIT SCORE
Get a Copy of Your Credit Report for Free
Before you can fix anything, you have to understand what it is that you are fixing. Therefore, it’s important that you obtain a copy of your credit report first. The good news is that you don’t have to go through a membership-based website or pay anything to get your credit report.
Every consumer is entitled to his or her credit report at least once per year. There are 3 major bureaus so, I suggest pulling your credit from one of them every 4 months. To get your free credit report, go to www.AnnualCreditReport.com!
Check Your Credit Report for Accuracy
Many people who have bad credit only have bad credit because their credit reports are inaccurate. Look at every aspect of your credit report. This includes your employment status, name, address and outstanding or paid loans and inquiries.
If you find anything that seems to be incorrect, simply dispute the information by writing the credit reporting agency. In your dispute, you should include your name, social security number and a copy of your driver’s license. You will also need to include a written statement of any inaccuracies signed and notarized.
Deal with Justified Past Due Debts
Now it’s time to face reality and start dealing with past due debts. Many people find $25 or $50 past due debts are all that is standing between them and good credit scores.
However, if you find that you have hundreds or thousands of dollars to pay back, it’s important for you to start contacting the lenders. Explain to them that you are trying to pay back your debts. Work with them to create a plan to start paying back that works for you and the lender.
Stick to Your Payment Plans
Building your credit score is one of those things that you have to only start when you are ready for the commitment. A late payment or two could be all it will take to erase all the hard work that you’ve put into your scores! Always stick to any payment arrangements that you make with your lenders!
Get a Secured Credit Card
Once you are comfortable with your new payment arrangements, it’s time to start creating positive remarks on your credit report. To do so, I always suggest starting by getting a secured credit card.
Designed as a tool for those with poor credit, secured credit cards can really help you get your credit up to par fast! The only downside is that you will have to put a small security deposit down. The amount is usually around $100 and is required before you can use your new card.
Use Your Secured Card Properly
There are several factors that go into using your secured credit card properly. Some include obvious things like on-time payments and others aren’t so obvious like, the amount of money that you spend on your card. With that said, I am going to divide this step into what I call sub-steps:
- Use Your Credit Card – The entire purpose of getting a secured credit card is to show lenders how you will react to revolving credit and balances. If you don’t use your card, you are cutting a huge factor out, revolving balances! With that said, don’t be afraid to swipe it every once in a while.
- Don’t Spend More Than 50% of Your Credit Limit – When it comes to credit cards, think of them as you being able to borrow more than your friend really wants to lend you. The reality is, spending more than 50% of your credit limit is the first sign of many financial hardships. Doing this will increase your debt to available credit ratio to an unhealthy point!
- Don’t Wait Until The Last Minute To Make Your Payments – Wouldn’t you love it if your boss paid you a week or two early? Well, the lenders love it too! Making it a point to consistently make early payments on your credit card will drastically improve your credit scores.
- Never Make Minimum Payments – When you make payments on your secured credit card, it’s important that you always pay the entire balance every month.
- Never Charge More Than You Have Available in the Bank – Since you need to pay your card of every single month, never charge any more than you have in cash. Your paycheck is never a guarantee, so don’t charge based on money you think you have coming your way.
If you follow these steps, chances are, you will be able to enjoy fair to good credit scores in as little as 12 to 18 months. And, with continued use, excellent scores in as little as 24 to 30 months! I know it may seem like a long time now but, my how time flies!
This article was proudly written by Joshua Rodriguez, owner, and founder of CNAFinance.com. To get to know Joshua and ask him questions directly, join the conversation on his Google+ Profile!