A credit score is a three-digit number ranging from 300 to 850. Your credit score is determined based on particulars like repayment history, tenure of your credit history, and the total amount of debt on your credit report. The higher the number, the better the credit score, and vice versa.
Depending on the credit scoring model used, the range may vary, but in general, a credit score lying between 580-669 is considered fair, 670-739 is considered good, 740 to 799 is considered a very good credit score, and above 800 is considered an excellent. Anything below 580 is considered a poor credit score and if your credit score lies in this range, it may be very difficult to get credit. However, there are several ways to fix a bad credit score.
Before fixing your bad credit, it is crucial to know where to start. As your initial steps to fix bad credit, you must check your credit score and know the causes leading to a bad score.
Some of the common factors that impact your credit scores are total debt, credit utilization ratio, age, credit accounts, public records, and payment history. Check whether any of these factors are imparting a negative impact and then find ways to repair bad credit.
How bad credit scores can affect your finances
Overall, it always helps to have a high credit score, therefore you must find ways to repair bad credit. Additionally, a high credit score will help you avail yourself of better interest rates, among a plethora of other benefits. Conversely, a low credit score makes it difficult to get credit or approval for loans and credit cards. Hence, you should find ways to improve your bad credit.
With a bad credit score, you can face problems like:
- Facing rejection when applying for loans and other types of credit. These include personal loans, car loans, mortgages, educational loans, and credit cards
- You may have trouble renting a place. Landlords run credit checks about your payment history to see if you will pay rent on time
- You may have to furnish a security deposit for using gas, electricity, water, and other utilities in your new home
- You could find it difficult to get a new mobile contract. Some wireless providers conduct a credit check before signing you on as a customer. Nonetheless, they also provide prepaid plans that do not require credit checks
- You may face issues during employment background checks when applying for a job. As part of the candidate screening process, they may view your credit report. If you have a bad score, they will check the reasons for the same
- You may end up paying higher insurance premiums. Insurance companies may use the information on your credit report and driving history to evaluate how likely you are to submit a claim before issuing a car insurance policy
How to improve your credit score?
Rebuilding your credit takes time and requires patience. It may also help to know that credit slipups fade away eventually. Nonetheless, their impact on your credit score and the time you require to recover from them depends on various factors. These include how big the credit missteps are and how recently you have made them.
As far as collections, late payments, and court judgments go, they linger on your credit report for seven years. And, bankruptcy charges stay from 7 to 10 years. The good news is that there are some ways to improve your bad credit score. As the positive credit information starts piling up, the big negatives will be forced out of your credit report. As you learn how to fix a bad credit score and your credit score improves, you can enjoy a range of attractive credit offerings that come with incentives and rewards.
In all, there are many ways to fix bad credit scores including re-establishing a good payment history, getting rid of all the negative information, and paying your debts. Here are some easy ways that can help you fix bad credit:
Clear all payment backlogs and make timely payments
One ends up building a bad credit through late payments or defaulting on the payments. Certainly, you should not do so. And if you’re wondering whether you can fix bad credit, here’s how to do so:
- A good way to fix your bad credit score is to pay off any pending bills and lines of credit
- Start paying off all your past due payments and make timely payments going ahead. For this, you can set up payment reminders and automatic updates to ensure you never make late payments.
Pay attention to your Credit-Utilization ratio
The credit-utilization ratio is the measure of the credit that is available to you and the amount you are using. Having a high credit utilization ratio is a definite way to pile up bad credit. Ideally, you should keep your credit utilization ratio at 30%. To reduce your credit utilization ratio, you should:
- Clear all your credit card dues
- Maintain zero or low credit card balances
- Exercise caution when it comes to closing accounts. Remember, the amount of available credit reduces when you close accounts and this impacts your overall credit utilization ratio
Consider opening a Secured Account
The best way to fix bad credit is to build a positive credit history. You can do so by opening a secured account, like a secured credit card. By doing so, you can deposit cash into your account as collateral and start borrowing a percentage of the given amount.
As you use your secured credit account and pay your bills on time, the credit bureaus start reporting good payment history to help you build credit. Also, among secured credit cards to fix poor credit, the Azpire Credit Builder Card by Zolve offers greater benefits than the other available ones.
The Zolve Azpire card does away with all the heavy interest charges and other fees. Moreover, like other secured cards, the Zolve Azpire Card does not require you to pay a security deposit. Besides, no credit check is required for getting your Zolve Azpire Card.
Among other benefits, an Azpire Card gives you the opportunity to earn up to 10% Dosh rewards.
Take assistance to build credit
You can approach your friends and family members to help fix bad credit if you are not able to get a loan or credit card on your own. Here’s how to do so:
- Collaborate with a cosigner who has a good credit history to fix poor credit. If you have a cosigner for a credit card or a loan, both of you become jointly responsible for repaying the loan
- Among other ways to improve bad credit score, you can start a joint account with a person having a good payment history
- Becoming an authorized user of somebody else’s credit account is among additional ways to repair bad credit
Be cautious with new credit
Opening new card accounts is never a good idea. And, it can be one of the best ways to build up bad credit, especially if you do not pay the dues on time. Think about it, your lender may interpret multiple credit card applications within a short span as a sign that you are in a financial soup. You can hardly blame them, since they want to be sure that you are not overextending yourself financially before giving you more credit.
A bad credit score does not signal the end of financial assistance. Luckily, you have several ways that can help you to increase your credit score. Know your credit standing and pay careful attention to the aspects that are causing your score to go down. Get your credit report and start to monitor your financial well-being today. If you maintain regular payment history, pay off your debts timely, and do not max out your credit limit, with time, you can positively fix your bad credit score if there is any.
Frequently Asked Questions
1) Are there ways to rebuild credit quickly?
There are various ways of quickly building credit again. You can do so by paying your credit card bills 2-3 times a month. Moreover, if you find any discrepancies in your credit reports, talk to the credit bureaus for the necessary corrections. In all, do not fail to make your payments if you want to increase your credit score.
2) Is there any connection between my credit score and credit report?
Creditors require your credit score for many reasons. Based on your credit score, they will decide whether to offer you credit or not. They will chart out the contract terms as per your credit score; this includes the interest rate and duration of the loan.
Your credit report contains details about your payment history and debt amount. And, going by the information on your credit report, the credit scoring agencies calculate your credit score. All this makes it important that you make sure your credit reports contain correct information.
3) How can I get my credit report?
As per Federal Law, as a US citizen, you have a right to receive a free copy of your credit report once every 12 months. You have to contact the three main credit bureaus (TransUnion, Equifax, and Experian) at AnnualCreditReport.com to obtain it.
Follow any of these steps to order your free annual credit report from the credit-scoring agencies:
- Browse the AnnualCreditReport.com website
- Call 877-322-8228 (toll-free)
- Fill the Annual Credit Report Request Form and send it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281
Besides, all US residents can order up to free credit reports every year through 2026. For this, they have to go to the Equifax website or call 1-866-349-5191.
4) How much time will it take to build a good credit score?
There is no fixed time frame depending on which you can build your credit score. Building a good credit score will need you to be consistent and regular with your payments. Other factors like continuing debt and mortgages should also be factored in. If you are regular with your payments and clear your debts, you can move from a bad credit score to a good one, in 10-15 months.
5) How can I take assistance to build good credit?
If you are finding it difficult to get a loan or credit, take help of those family members or friends who have a good credit score. You can ask them to be a cosigner for a loan. You can now have the opportunity to improve your credit score for now you have a solvent person take the responsibility of loan repayment with you.