While you don’t want to have a low or poor credit score, it is pretty common and happens often to people. The good news is, you can take steps to fix your credit and can have dramatic score increases in relatively decent time.
However, the other part of this is to also protect your credit scores. With the digital advances comes more threats from others trying to open credit in your name and run up damage to your report. Just like there are tips to fix your credit, I have some insights on how to protect yourself as well.
Fixing Your Credit
If you have a poor credit score or none at all (it’s possible to have zero if you have not had any credit or your credit is under six months old), it will be difficult to get any line of credit. But, there are ways to fix your credit score and start to establish your credit history.
Step 1: Look for Any Errors or Issues
A quick way to potentially increase your score, is remove any errors, issues, or other weird inaccuracies that tarnish your score. There may be false accounts opened, payments marked as late that were not, and other things.
Get a copy of your full credit report for free at AnnualCreditReport.com. They are authorized by the federal government to provide consumers with a copy of their credit report at no cost.
If you notice anything is inaccurate, you can file disputes with the credit bureaus to get them removed and take care of inaccuracies.
Step 2: Pay Overdue Bills and Pay On Time Moving Forward
Your payment history is one of the biggest factors to a great score. So if you have any debt in collections or bills not paid, get those taken care of immediately. Many of the companies looking for their money are willing to work with you to get a payment plan in place. Just making an effort goes a long way!
From there, you need to be on top of your payments and be on time with everything. This was a huge reason for my upper 700’s/low 800’s credit score. I have 10+ years of bill payments at a 100% paid on time with nothing in collections.
Set up some automatic payments to never miss a bill or set up recurring reminders for yourself in your phone, calendar, or other apps.
Step 3: Apply for New Credit Accounts Only as Needed
Every time you apply for a new credit card or line of credit, the inquiry will ding your report a few points. Not a big deal from time to time when you need to apply for something.
But doing a whole bunch of applications can harm your score. These are called “hard inquiries” and typically will remain on your credit report for up to two years.
It’s okay to have 1-2 cards at once, but only if you are going to be responsible and not rack up tons of debt, further harming your score.
Step 4: Don’t Close Unused Credit Cards
Just as applying for too many credit cards, closing unused cards can also negatively impact your score. If your current cards do not have annual fees, they have not been hacked, and you don’t feel tempted to use them for overspending, then keep them open. Just put them somewhere safe, but out of your reach if you’d be tempted to use them.
Step 5: Lower Your Credit Utilization
You might be wondering what this exactly means, but it’s more fancy sounding that it is. When you have a credit card you usually have a max limit of what you can spend. If your credit limit is $5,000 and you use $1,000 of that, your credit utilization rate is 20%.
On average, lenders prefer to see you under 30%, as it signals you aren’t overspending or maxing out your credit every month.
Lastly
There is no quick fix for low credit scores and varies on how long you can see improvements. It depends on just how many blemishes are on your report, how quickly you act, and that you stay on top of your payments and credit.
In order to start establishing some credit, many banks can work with you by opening a card that is attached to your bank account. It would act more like a debit card, so you have to have a minimum balance in your account, but can help establish your credit.
There are also a few credit card companies that are for those with low scores. The interest rates may be high or there may also be an annual fee, but these can help you get started. You can always upgrade later as your score improves and get access to better credit cards.