There are many tips and hints available for fixing credit score problems. Unfortunately, if you aren’t quite sure what you’re doing, you could potentially make your issues worse instead of better.
Understanding how your credit score works isn’t difficult. The Credit Reporting Bureaus put together a summary of your borrowing history, your debt levels, the types of credit you have and your repayment history, which is then calculated to give a score on the credit score scale.
Lenders and banks access your score to determine how you’ve managed your financial obligations and responsibilities in the past. A higher score tells them you’re likely to be a good paying customer, while a lower score tells them that you’ve had some financial difficulties in the past.
If you need to work on fixing credit score problems and are asking the question “how can I improve my credit score“, here are some easy tips that can help to boost your score.
1. Order a Free Copy of your Credit Score
Before you begin working on fixing your credit score, you first need to know what it looks like today. Order a free copy of your credit score from all three Credit Reporting Agencies. You’ll find that there can sometimes be a discrepancy in your total credit score between each agency. When the report arrives, read through the listings carefully.
You should notice that any credit inquiries you’ve made in the last few years are shown there, along with any missed payments, defaults, judgments, liens or any other issues you might have had.
Once you have a clear idea of what is affecting your current credit score, you’re in a stronger position to work on fixing any problems.
2. Remove Incorrect Listings
If you notice any listings on your credit report that don’t belong to you or any listings that should have been removed, make a careful note of them. Incorrect listings can be disputed and if the Credit Reporting Bureau can’t verify your claim, the listing will be removed.
You should be looking for entries that weren’t made by you. These can include listings for people with similar names to your own or listings made fraudulently by someone using your identity.
You should also look for any listings marked ‘unpaid’ or ‘past due’ by the lender that you know you have paid in full. These can be amended by your creditors easily once you’ve verified that the account has really been paid.
3. Clear Up Past Due Debts
Once you fall behind on repayments it can be difficult to catch up again. Unfortunately this creates a negative spiral where your lender may be charging you penalty interest rates and overdue fees, which makes it even harder to catch up.
If you’re serious about fixing credit score problems, then you’ll need to look into ways to catch up those past due debts and pay off debts as soon as possible.
You might consider a debt consolidation loan or a balance transfer credit card that offers a lower rate than you’re paying now to clear those old debts. If you don’t qualify for these options, then you may need to negotiate a realistic payment plan with your lender to help you get back in front.
4. Negotiate a Payment Plan
If you have no way of raising enough cash to clear any overdue payments, call your creditors immediately and negotiate a payment plan. Where possible, try to make sure your payment plan is realistic and that you can afford to keep up with the amounts you’ve agreed to pay.
While you’re talking to your creditors, it can’t hurt to ask if they’re willing to negotiate a lower interest rate with you, or perhaps an adjustment on the penalty fees and charges you’re paying.
Once you’ve set a payment plan that is designed to pay off the overdue amount, be sure to add even small amounts extra on top of the payment due. Even an extra $5 per month can have a huge benefit to putting you back in front.
When your past due payments are caught up, call your lender again and ask them to amend the negative listing they placed on your credit report. A paid default listing is far preferable to an unpaid debt listing.
5. Repayment Frequency
An entire 35% of your total credit score is based on your repayment history. As this is a major portion of your total credit score, it makes sense to focus on this aspect to give your score a quick boost.
Take a look at how often you pay your credit card bill right now. If you’re like most people, you’ll make the payment once a month on or around the due date. However, if you don’t have the cash to make an entire monthly payment when the due date arrives, you risk being late with your payment. Your lender will report this late payment activity and this could affect your credit score adversely.
To help avoid this problem from happening, try to make your repayments on a more frequent basis. For example, if you receive your income weekly, pay one quarter of your regular monthly repayment each time you get paid.
You’ll be paying four smaller amounts of money each month that still add up to the minimum payment due. Keep your credit card bill so you can make payments when you want to make them. If you have personal loans, call your bank and see if they can arrange to make more convenient payments.
Your creditors will be happy that your payments are on time and you’ll find it’s much easier to budget this way. It’s also much harder to fall behind on your payments.
6. Re-Structure Your Finances
An entire 30% of your credit score is calculated based on the balances you have outstanding as they relate to the credit limits available. Unfortunately, this has led people to try and shift existing balances around between other cards in an effort to reduce credit score. While the theory sounds good, the reality is most people will simply begin to spend more once they have the extra credit available.
An easier way to fix this aspect of your credit score is to restructure your finances. A good example of this could be to try and consolidate some outstanding credit cards or store cards into a personal loan or consolidation loan. You should find that the interest rate charged on these types of loans is often lower than you’re paying on credit card balances, so you could be saving money on interest as well as reducing your monthly payments.
While you’ll still have the same amount of debt to start with, as you make each payment, the amount you owe is reduced. This is because the payment structure on loans is dramatically different to the payments due on your credit card balances.
As your debt level drops, your credit score will begin to improve with it and you can starting working towards that perfect credit score you’ve always wanted.
7. No New Credit Cards
The worst thing you can do when you’re working on fixing credit score problems is to keep building more debt. This can be challenging at first, especially if you’re used to paying for all your purchases on credit card.
Instead of adding more debt, ask yourself if you really want to pay off a pair of shoes or a night out at 18% for the next couple of years. If you really want to buy a more expensive item, try putting it on lay-away and pay it off each time you get paid instead. It’s interest-free this way and won’t harm your credit score.
8. Mix and Match
By mixing and matching these tips to suit your own budget, you should find that it doesn’t take long to regain control of your finances again. Stick to your plans and work on keeping up with your payments. If you find you have a couple of extra dollars left over at the end of the month, put the extra into your repayments to help you even further.
Fixing poor or average credit score issues doesn’t have to be difficult, but if you still find you’re unable to make any difference on your own, don’t be afraid to seek out professional help.
Once you fix your credit score problems you can begin building credit again – but only once you’ve fixed your credit score. It’s suggested to have only two credit cards at most and pay off all credit cards each month. When you find the right credit card you can get credit card rewards while also using your credit card to build your FICO score.