A credit report provides a snapshot of a person’s repayment history. Missed payments, defaults, delinquent accounts, debt-free solutions and bankruptcy all make it a lot harder to borrow money for the next 7 years. This figure grows to 10 years after filing for Chapter 7. However, it is possible to fix bad credit and enjoy the benefits of a better credit score more quickly. If the potential to improve credit weren’t there, there would be no incentive to pay bills and debts on-time in the future. The advice and guidance below will help to repair low credit scores in a fraction of the time.
Correct Credit Report Errors to Fix Poor Credit
Lenders cannot determine the difference between bad credit and bad data. Although it is assumed that all the information that is held by credit reference agencies is accurate, this isn’t necessarily the case. It is important to request a free credit report and check this for errors on an annual basis. The Fair Credit Reporting Act gives the individual the right to correct any erroneous data. This is an effective way to fix bad credit fast.
Pay Bills Punctually to Fix a Bad Credit History
In order to rebuild credit, it is important to make a series of timely repayments in respect to a source of revolving debt (credit and store cards) and installment debt (loans and mortgages). One of the difficulties that people face when fixing adverse credit is having sufficient lines of credit available to achieve this objective. Whilst most consumers have a secured mortgage or car loan, the majority of people with poor credit have opted to eliminate unpaid credit card debt. However, there are a number of unsecured and secured credit cards that can be taken out to help rebuild credit ratings. Although it involves providing collateral, secured cards are the preferred option because customers benefit from a larger credit limit. It is important that all repayments are made on-time or the entire credit rebuilding process will need to commence from scratch.
Don’t Max-Out a Card for a Higher Credit Score
- Maxing-out a card will cause a score to fall by 10 to 30 points. This applies even if the full amount is cleared at month end.
- Pay a credit card debt 30-days late and expect the average score to fall by about 60 to 80 points. Settling within the normal 30-day repayment cycle will normally just lead to a late fee.
- Never use more than 30% of the allocated credit limit to benefit from a better credit score. Don’t put all debt on a single card, spread it across several of them. Spending less than 10% of the allocated limit each month will help to repair a bad credit history a lot faster.
- Closing old credit and store card accounts doesn’t help, it hinders. Rather than closing the account, use it sparingly and settle the full balance punctually.
- Performing an interest-free credit card balance transfer from a high to a low limit card isn’t recommended.
Pay Down Debt for a Better Credit Score
The amount of debt a consumer has relative to their income has a huge bearing on a credit rating. High levels of debt increase the likelihood of the borrower defaulting on the agreement. Rather than leaving savings in a low interest checking account, use the money to pay-off high APR and secured debt. It is not just a more economically sound strategy, it’s a great way to help repair bad credit. Family members often lend money to loved ones so that they can clear debt before applying for a low rate mortgage or refinancing a loan.
Get Improved Credit for Affordable Finance
Poor credit repair isn’t an instant process so don’t waste money paying a specialist service when this can easily be handled by the individual. Removing credit report errors or changing the way the revolving debt is managed can reap quick rewards, but rebuilding credit through a series of timely repayments takes time. However, even someone who has filed under Chapter 7 could still qualify for a bad credit mortgage in under 3 years. Fail to pay on-time and it will be necessary to fix a bad credit history all over again.
