7 Easy Ways to Fix Your Credit

easy ways to fix your credit

If you have the day off today it’s the perfect time to spend it improving your personal finances, and it all starts with your credit.

Analyzing our financial situations can be a daunting task, especially if a bad credit score haunts you. But, despite how easy it is to fall victim to credit, it doesn’t have to be the enemy we often make it out to be. If the words “charge it” made a regular appearance in your everyday vocabulary without a plan of action, you may be in need of some personal credit repair. Although the damage may seem irreversible, there are easy ways to fix your credit. Below, I’ve listed just a few:

Easy Ways to Fix Your Credit

Don’t Transfer Your Credit

It may be tempting to simply transfer your credit from one card to another, but avoid this as much as possible. All you are doing is causing yourself more heartache and (and debt) instead of taking action on your existing due payments. Along with putting off the inevitable, you may be subject to transfer fees and are therefore increasing your costs.

Keep Cards Without Annual Fees Open

As counterintuitive as it sounds, don’t close all your accounts at once. Instead, keep the ones that do not charge you annual fees to use for small purchases. The key is to make sure you then pay off those balances right away to avoid late fees, increased interest, and so on. This action alone is one small step you can take in improving your credit. Plus, canceling your cards without taking the proper steps (or that still have a balance) can end up hurting you more. CreditCards.com provides these helpful tips on how to cancel a credit card.

Seek Help Online

The internet is full of resources just waiting to help you with all your financial woes. In addition to this blog, you can find companies online dedicated to helping you repair your credit, such as Credit Sesame, which is a free web-based tool that provides you with not only a free credit score but advice on how to improve it as well. Not to mention, there are plenty of online financial forums you can participate in as well, like this one.

Review the Statute of Limitations on Your Debt

Your debt does have a statute of limitations, which essentially means the length of time that passes where a creditor can sue you for the outstanding payment. This length of time varies from state to state. If the statute of limitations on your debt has run out, you’ll be able to negotiate a lower overall sum. In some cases, the collector may end up ceasing efforts to collect the money owed.

Look Into a Secured Credit Card

CreditKarma.com advises individuals looking to rebuild (or building credit history in general) to consider a secured credit card. Secured credit cards, they explain, typically require that you pay a security deposit to work as collateral in the event you may have a past due payment on your account. Because you are taking on the financial risk with this deposit, they are not only easier to obtain approval by lenders but also help you improve your credit.

Avoid Filing for Bankruptcy

Filing for bankruptcy should be an absolute last resort. Try to avoid taking this step as much as you can as this stays on your credit record for roughly seven to ten years. It may wipe out your credit card debt, but it will not improve your credit report. In some cases, it may actually make it worse and will make it harder to obtain a loan or credit cards in the future.

Pay Your Credit Card Bills Early

Make an effort to pay your credit card bills before the statement due date. By paying your bill before your next statement is even ready, you can help to increase your credit score. This is really one of the easiest ways to fix your overall credit.

The important thing to remember is that you are not alone in this process. It does also seem to be easier to improve your credit as you get older, given that time helps to build a credit history, as shown in this December 8, 2016, article on CreditCards.com by Jamie Gonzalez-Garcia. The process is not easy (or fun), but with due diligence and discipline, you can conquer your credit and look forward to reaping the benefits of your hard work.

The above methods are just a few of the easy ways to fix your credit. What would you add to the list? 

What is the Starting Credit Score?

starting credit score

A common misconception comes with turning 18: You can automatically start borrowing money on your own. Wrong. While you are targeted by credit card issuers all wanting to take advantage of your newly found adulthood, you are unable to take out a loan. At least, not without a cosigner. Why is this? The answer is fairly straightforward, really. It’s all thanks to a lack of credit and data. So, what is the starting credit score?

The Starting Credit Score

Credit does not automatically appear on our records; we have to put it there. Until we put borrowing data on our records, we have no credit, credit reporting company Experian explains. Thus, the starting credit score when entering adulthood is non-existent. This is not the same, though, as having a zero or bad credit score. It essentially means there is no record or data on which to base your repayment capabilities. Credit.com goes on to explain that your score does not event start at 0. For most companies, the scoring range goes from 300 to 850, with 300 being the worst or lowest.

So, if we start with no credit, how can we build it up?

How to Build Your Credit Score

There are a few ways to grow and develop your credit score. As annoying as the multiple direct mailers from credit card companies may be, credit cards can be a great tool to build that score. But, don’t just pick any credit card. Make sure to research interest rates (especially on retail credit cards), terms and conditions, and more before signing off on that plastic. When starting from scratch, a secure credit card may be the best option for you. Many carriers like Visa and Mastercard do have secured options. Likewise, if you’re in college, look into student credit card choices. You just need to shop around for the perfect one for you and your situation.

Another way to take your score from nothing to something would be a credit-builder loan, which are smaller loans that do exactly what it sounds like: build your credit. You can also have someone co-sign with you on a loan. Once you start making repayments on the loan, you will start developing that “data” discussed previously in this article. It will take about six months of consistent and positive reimbursements for your numbers to start to appear on reports.

Tips on Keeping Your Credit Score Positive

Once you build your credit, you need to then continuously and simultaneously make an effort to keep it positive. Having a higher rating will provide you with more opportunities to request borrowed money when necessary (like when buying a home), unlike the situation when you have a starting credit score. Here are few quick tips on keeping your rank in the green:

  • Automate your payments. Arrange for your credit card(s) to take a fixed amount from your bank account each month to go toward your balances. This not only prevents a missed payment, it helps to show companies you are financially capable and responsible, which will boost your credit rating.
  • Monitor your credit report. Request your credit report regularly to keep yourself aware of your report and changes that may have recently occurred. If you notice it is not where you would like it to be, you can start making a conscious effort to improve it.
  • Pay your bills on time. Avoid making late payments not just on your card balance but your household bills as well. If you get behind on your electric bill, the utility company can file a claim against you, which would hurt your score. This may seem like a no-brainer, but this is a common cause for poor credit.
  • Talk to the companies. We all go through hard times, and sometimes, our finances can be unforgiving. However, most people don’t realize that by simply informing bill collectors of your circumstance, you may be able to lower your payment amounts temporarily until your situation improves. This helps to lessen the blow to your credit score while you work on getting back on your feet.

Even though the starting credit score is non-existent, it is far from impossible to grow it. Everyone builds theirs at a different pace. As long as you still make wise decisions, stick with a budget, and remember that borrowed money needs to be repaid in a timely manner, you will be well on your way to a higher credit rating.

What problems did you face when you first started signing up for loans, and how did you overcome them?

How to Fix Your Credit: A Key to Financial Freedom

fix your credit

When you fix your credit, you are one step closer to financial freedom. But, how do you do this?

Credit comes with its many benefits and of course its negatives. It takes careful, responsible spending and timely repayments in order to really see its positives and not experience its dark side.

Those in need of repairing their credit know how difficult it is to be approved for loans, receiving lower rates and getting ahead. But, there is good news. You still have hope and can fix your credit.

Fixing your credit can help you get closer to financial freedom. Here are some great tips to help you get started:

Don’t stop believing

Continuing with credit seems counter-intuitive, but using credit is a great way to achieve a good score. As long as you pay them back immediately, do use your credit cards. You also want to mix up the type of credit you use (i.e. installment accounts such as mortgages and revolving accounts such as lines of credit). Don’t wait to repay; not only does this harm your finances due to interest rates, but it hurts your score as well. Your payment history is one of the key factors of determining your credit score. You want to make sure you can prove to credit card companies you’re capable of timely repayment in order to improve your rating.

Open a savings account

Opening a savings accounts helps to reach a favorable credit rating. As simple as it may sound, this does show companies that you are financially responsible and have the resources to pay for debts.

Spread out your disputes

You can dispute items from your credit reports. If you do, however, just be sure to spread them out and do one item at a time, starting with the most damaging or largest items first. Disputing too many things at once signals a red flag to the credit bureau, and they could consider them to be insignificant. Make sure to really take time to examine your report.

Keep balances low

This one is pretty simple. Just because you have a $5,000 limit each month does not mean you should reach or max it. Keep your balances low so that they are easier to handle.

Get your monthly report

Tracking your monthly activity with your credit is just as important as tracking your other expenses each month. If something seems off, you will be able to dispute it right away. This is a good habit to develop. It will be a cost to get them monthly, but it will be worth it to keep you on a favorable path. To ensure your report and activities are current across the three major credit bureaus, retrieve reports from Equifax, TransUnion and Experian yearly. Not to mention, you’re able to get one free report from each bureau each year under the Fair Credit Reporting Act, making the cost of credit maintenance low.

Don’t create more debt

If you’ve put yourself in a bad situation with your existing debt, you generally should avoid opening more credit cards or loans to pay off what you have. This can really cause the problem to continue to spiral out of control. Instead, you need to start focusing on ways to reduce this debt in order to fix your credit. On the contrary, there may be times where it is OK to open another credit card in order to generate some positive credit history. A secured credit card, which requires a deposit that serves as your limit, could be the answer for you in those sticky situations. Just don’t sign up for unnecessary credit cards.

Know that this process will take time and dedication before you start to see improvement. There will be a many ups and downs on the road to credit repair, but try not to get discouraged. Make it a priority so that you can work toward that financial freedom you’ve been dreaming about for a while now. If you feel overwhelmed by the process, just take things one step at a time. Create better spending habits in order to ensure you are not in a situation like this in the future.

What steps are you taking to fix your credit? What route has worked best for you?