Have you been told by the bank that you have a bad credit score?
Your credit score will affect how much money you can take out for car loans, home mortgages, and personal loans.
Credit scores range from 300 to 850, and a score of 700 or above is generally regarded as a good credit score. Many people have credit scores between 500 and 650 and wonder what they can do to improve that number.
If this sounds like you, you’ve come to the right place. In this post, we’ll take you through a few reasons that you might have a low credit score–and how to improve it.
1. Payment History
Are you paying all your bills on time?
Late payments and skipped payments have a negative effect on your credit score. Payment history is significant–it makes up about 35% of your credit score.
If you are trying to repair broken credit, one of the best things that you can do is sign up for automatic bill pay.
Also, review your credit report and see if you can pay off accounts that are in default. Defaults weigh heavily against your credit score and could remain on your record for up to six years.
2. Amount Owed
You might be surprised to learn that the amount of money you owe can count against you on your credit score.
If you have several credit cards that are maxed out, it can seem like you’re having financial problems. You should always keep your debt at about half your overall credit limit. The amount you owe makes up 30% of your entire credit score.
On the other hand, not having any credit history can count against you as well. If you’re just starting out, it’s probably a good idea to use a credit-building card to establish the fact that you can pay on time and in full.
3. Credit History
Lenders want to lend money to customers who have been at their address for at least several years.
If you want to improve your credit, you should register to vote at your home address. It may sound funny, but it shows that you intend to remain at your address for a long time.
Credit history makes up 15% of your credit score and takes into account the average age of your accounts. The longer you maintain accounts like your electric, gas, cable, and phone, the better it looks on your report.
If you have a bad credit score, it might be due to the age of your accounts. Experts report that people with credit scores of 800 or more have accounts that are at least 25 years old.
4. New Credit and Credit Mix
Every time you apply for a credit card, it affects your credit. Even if you do not get approved for that card, the application still counts as a “hard search” on your credit.
If you’re wondering, “Why is my credit score dropping?” it could be that you’ve got too many hard searches on your account.
Instead of applying for a wide variety of credit, try to apply only to credit cards that you know you’re qualified for. New credit applications only make up 10% of your credit score, but lenders want to see that you’re making good use of your existing credit.
Lenders also want to see that you are responsible for several different types of accounts. Keeping a low balance on your credit cards and paying your home mortgage and car loans on time will affect another 10% of your credit score.
When you’re checking out your credit report and starting to repair your credit, make sure you check all your accounts for errors.
Identity theft affects more than 15 million people each year. If you notice a misspelled name or incorrect address, it’s important to raise a dispute with the credit reporting agency.
Also, if you have used more than one name in the past decade, it’s important to make sure that your credit report is free of errors.
To improve a bad credit score, make sure that your longstanding accounts are listed on your credit report. It may take a little while to remove any mistakes, but the benefits to your credit report are worth the effort.
How Can I Repair a Bad Credit Score?
The first step toward repairing low credit scores is to thoroughly assess your report. You might want to contact a professional credit repair team in order to get you started.
Pay off any debt that you can, especially on accounts that have defaulted. Often, companies will settle for a lower payment just to have the account cleared from their books.
Make sure that your credit report has the correct address, name, and social security number. Take the time to correct any mistakes that you find.
Don’t apply for too many credit cards or loans all at once, and pay down your existing credit cards. You shouldn’t be using more than about half of your available credit.
If you’re in the market for a home or auto loan, you may want to take it out at a higher interest rate. If you can, pay more than the minimum amount each month and see if you can refinance after a few years.
Should I Contact a Credit Repair Website?
If you’re serious about repairing your credit, finding a good credit repair website is a good step to take.
The average American household owes more than $15,000 in credit card debt. Once you add in car loans and home mortgages, you could be carrying hundreds of thousands of dollars in debt.
The higher your credit score, the better the rate that you’ll get on new loans. If you invest some time into repairing your bad credit score before you go in for a loan, you could save thousands in interest.
Take the time and see how much you can improve your credit in six months. Make sure that you report any inaccuracies and that you’re paying off as many accounts as possible.
We have helped thousands of people with their credit repair. Drop us a line with any questions you have!