How to Fix Your Credit
Don’t fall for scams promising easy, overnight credit repair. There is nothing a credit repair service can legally do for you that you can’t do for yourself for little or no expense. There’s no quick fix for your credit but the Cain Mortgage Team can help you improve your scores significantly, read more below.
If you’ve had an overdue student loan, high credit card balances, or collection accounts, you probably have low credit scores. With poor credit, you probably won’t get approved for new credit such as credit cards, mortgages, or car loans.
Negative information such as missed payments and collection accounts remain on your credit report for up to 10 years. The good news is that you can repair your credit score on your own with knowledge of what is required and a bit of patience. Start building a positive credit history and improve your credit score over time.
Steps to fix your credit
- Review your credit report
- Know your credit ratio and payment history
- Pay down current debts
- Make on-time payments
Review your credit report
To better understand your creditworthiness and what lenders see, check your credit report to learn more about your financial situation. The three main credit bureaus, TransUnion, Equifax, and Experian, will give you a free copy of your information once a year.
Generally speaking, credit reports from each bureau are similar, but not always. For a variety of reasons, credit reports aren’t identical, and some information may be incorrect. File a dispute with a credit agency if you find any discrepancies within your records.
Once you’ve dealt with any mistakes on your credit report, you must ensure you’re not spending more than you can afford each month. If you want to settle bad credit, you need to start paying all your obligations on time.
Know your credit ratio and payment history
Your payment history is the most critical consideration of FICO scoring models. Late and missed payments reduce your credit score, while bankruptcies and collections cause significant damage. Your scores consider the magnitude of your debt and the timing of your missed payments. The more recent your missed payments are, the lower your score will be.
Credit scores also factor in the age of your oldest account and reward individuals with longer credit histories. Just like fingerprints, every person has a unique financial situation. Make sure you evaluate your situation and take the approach that serves you best.
High credit utilization can also negatively impact your credit scores. Generally, it’s an excellent idea to keep your credit utilization below 30%. Take charge of your credit cards by paying down any account balances and consider increasing your available credit by requesting a credit limit increase or opening a new credit card.
Pay down current debts
To borrow money, you need higher credit scores, and if you have money to pay down your balances, then perhaps you wouldn’t need to borrow. However, one of the quickest ways to improve your scores is to pay down high balances on credit cards. Paying down balances may be tough and a lengthy process to increase your credit scores, but it’s a healthy long-term plan. Not only will your credit score improve over time, but you also won’t pay as much interest, which will provide significant savings over time.
Credit score agencies consider how much you owe and what types of debt you have. Do your best to keep all credit card accounts below 30% of the credit limit and always stay away from Finance Companies. Finance Companies are considered “high risk” loans and will have a negative impact on your scores. Additionally, the rate of interest they charge, will never let you get ahead. Typically, you will pay back double what you borrowed.
Make on-time payments
Paying your bills on time is the fundamental element to fixing your credit. By making consistent payments on time, you’re showing creditors and potential lenders that you’re responsible. Set up automatic payments for the current debts so that personal mistakes and oversight are eliminated. Although adding new credit may help your financial outcome, limit the number of hard inquiries in a short period and keep monitoring your credit score to keep track of your progress.
Another way to quickly increase your credit score is to be added as an authorized user on a spouse or close family member’s card. If they have a credit card with a good pay history over three or more years and keep a balance below 30% of the credit limit, being added as an authorized user can increase your scores significantly.
It’s hard to say with certainty how long it takes to rebuild credit as everyone’s financial history is different. While some actions may result in an immediate impact, others may take months to show a significant improvement. The problem is credit repair is like improving your social network: you only think about it when it truly matters. It’s nearly impossible to correct a financial situation overnight, but with the right tools and information, you can increase your scores significantly within 90 to 120 days.
Call The Cain Mortgage Team today at 803 261 9267 to discuss or answer any questions you may have!
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