Having a solid credit history and good credit score can be an important factor in the outcome of many decisions and your progress towards financial goals.
Large purchases, such as home and auto, are easier to obtain financing for when you have good credit, as well as new lines of credit.
However, sometimes events happen that may cause your score to fall into the poor/bad credit range. Things like missed payments, utilizing too much credit, opening too many accounts, having an account in collections, bankruptcy, and tax liens can severely impact your score. When these things happen, it can be difficult and take some time to repair the problems; however, it is possible. Read on below for 5 tried and true methods for repairing bad credit that could help you bring your score back up.
1. Investigate Your Credit Reports
If your credit score is suffering, one of the first things to do is pull a copy of your credit report. You are entitled to one free report each year by law, but there are online companies that you can utilize for free to monitor your report more regularly as well.
When you investigate a detailed report of your credit, you can find things you were unaware of that are negatively impacting your credit, such as unpaid fraudulent accounts opened under your name or inaccurate reporting by a creditor. This detailed view will give you an opportunity to then assess and act to repair any issues, such as reporting a fraudulent account so it can be removed from your report. Fixing problems such as this is an effective way to bring your score up.
2. Bring Accounts Current
Unpaid credit accounts can severely impact your score. If you have credit cards, auto loans, mortgage accounts, or other lines of credit that are not current in payments, acting to bring them current is one of the best things you can do.
Depending on how much is owed, and the length of time the account has been unpaid, it’s understandable that this can be a significant undertaking. Making an effort with your creditors by contacting them and proposing or requesting a payment plan, or offering a settlement, to rectify your accounts standing can make all the difference in your credit score beginning to climb.
3. Pay Down Account Balances
Sometimes having your credit accounts in reasonable payment standing merely is not enough. If your debt to income ratio is too high, or if you are maintaining high balances on your credit accounts, this can drastically reduce your score. Focus on lowering your balances and lessening your credit card usage, and you’ll see the positive impacts on your score.
4 . Open a New Line of Credit
If you have high account balances that you cannot immediately pay down, or if a high debt to income ratio is lowering your credit score, seeking to open a new line of credit can help. Opening a new line of credit and responsibly using it and paying it off will increase your credit availability, decrease your credit utilization, and show proper credit usage. Pairing this with paying down your other accounts is an excellent way to improve your credit score.
5. Consult with a Credit Repair or Counseling Agency
If you find yourself in a position where your debt amounts are overwhelming and you have accounts at risk for or currently in collections, seeking guidance and assistance through a credit repair company or credit counseling agency can help. Companies such as these can often help you eliminate debt, negotiate the debt down, or institute payment plans to begin climbing your way out of debt and into a better credit score.