Before you start to fix bad credit and raise your credit score, you need to first find out why you have such poor credit history. In some cases, people do not know or are confused why they have bad credit problems.
So if are not sure why your FICO credit score is lower than average, it is time to learn the entries on your credit report that can influence the overall score and make you suffer from bad credit history at the banks and lenders. Only this way can you try to remove them correctly and fast.
There are many ways for you to end up with lower credit score than expected and these typically are:
- Bankruptcy or Foreclosure
- Outdated or invalid information on your credit report
- Late credit card payments or installment loan payments
- Your credit history is too new and less than 3 years
- Too few types of credit history recorded on your credit report
- Your total available credit is too low (meaning how much you can borrow now)
- A lot of credit checks within a short time
While it is clear that you are going to face bad credit for at least 5 years if your have filed for bankruptcy or foreclosure, the other situations can happen without you being aware. However, when these add up, the end result can be devastating on your FICO score score, where 10 to 200 points may be deducted depending on the severity of the penalty.
For example, your lender or creditor will report you to the credit bureau for a variety of activities if you are not include. The common ones are:
- minus 10 to 45 points for maxing your credit card limit
- minus 45 to 125 points for settling a debt with a reduced payment
- minus 60 to 110 points for late payments over 30 days
- minus 85 to 160 points after a foreclosure
- minus 130 to 240 points after a bankruptcy
Do not make the mistake of ignoring your low credit score until you really need credit or to borrow money. Get it fixed now and progressively raise your credit score now so that you can apply for loans or credit and be approved easily with low APR when you need it,
The easiest way and the first step to fix your credit fast, is to get a free copy of your credit report from the central bureaus. This is important because you want to check for errors and incorrect entries that may be unfairly hurting your FICO credit score. You can sign up for credit score monitoring services to make it easy and cheap to regular check on your FICO score until you have raise it to ideal levels above 700 points. This is important when you are in a hurry to fix bad credit within 1 month because you need to get credit fast for buying a house or car etc.
How fast you can fix bad credit to 700+ points depend a lot on how serious and the number of negative records on your credit history. It may take a while to clean up bad credit history, and it is important you stop letting your existing debts and creditors hurt your FICO further. This means you must handle all your active payments and credit card bills, avoid any more late payments, etc. If you have any credit card collections, try to pay it off as soon as possible.
Next, you can follow these suggestions and tips to fix your credit legally and work on raising your FICO score instantly.
Dispute and remove all inaccurate credit information on your report. Just write to the credit agency to explain any inconsistencies you have found and they must verify the issue within 30 days. Usually, they will simply remove the entry from your credit report and the associated penalty will be lifted. This works well for late payments over 30 days because it is not easy for the credit bureau to prove that you really have late payments.
When you have serious financial problems in the past such as a tax lien, judgment, foreclosure or bankruptcy, a credit repair attorney will be able to help your fast rather than fixing bad credit yourself. For example, fully discharging a bankruptcy does not really help because 130 to 240 points will still be deducted for the next 7 years. Credit card judgments can affect your credit score for 10 years, 7 years for a foreclosure or tax liens. Instead of waiting such a long time, hiring a good credit repair law firm to remove these tax lien, judgment, foreclosure or bankruptcy from your credit report is a faster and legal way.
Be aware that many things you do or do not do will be reported on your credit history. It is a lot easier to damage your credit than it is to repair your credit. So you need to ensure avoiding further credit mistakes while you are working really hard to maintain or raise your credit score. Make these personal financial tips into your own habits so that it is easier for you in the long run.
Do not close all your credit card accounts. Cut the cards into two if it helps to prevent you from more impulsive purchases, but do not close your active credit card accounts. When you close credit accounts, it actually downgrades your available credit which is bad. Furthermore, you lose some well aged and established credit accounts. Just keeping active credit accounts open will help improve your credit score.
Maintain at least 1 credit card from each major issuer such as American Express, MasterCard, VISA, Discover etc. This help to show that you are accepted as a responsible borrower with various creditors. Having different types of credit can help too, such as having a retail credit card, taking an installment purchase loan for equipment, a home loan etc.
The most valuable type of credit history is a big long term loan such as a mortgage or a 60 month car loan. When you consistently make timely payments on such accounts, your credit score will improve. Therefore, when you have problems paying all your creditors on time this month, prioritize the mortgage loan first, and then the smaller installment loans.
Keep a record of your credit limit and remaining credit balance on the accounts you use regularly. You must avoid over extending your credit limit as this will be reported to the main credit agencies. When you have exceeded half of your limit for a particular credit account, stop using it until you have paid it down.
Pay all your bills and debts on time. Late or skipped payments will be reported to the credit bureau and this is very damaging to your credit score. If you are overdue by 30 days, the penalty can deduct 60 to 110 points.
This may be too late, but if you are still a student, go get a bank issued student credit card now to start establishing your credit history and an aged account. You will be viewed as a stable borrower and this will help you to apply for more credit easily in future because a longer account history of at least 3 years helps to raise your FICO credit score despite a poor credit history.