There are many ways to damage your credit score, such as increasing student loans. Fortunately, with a little diligence and hard work, there are plenty of ways to fix your credit, too. So if you’ve run into a bad situation and wondered, “Whoa! How can I fix my credit score now?”, you’ve come to the right place.
Getting started: What is a credit score?
This is a 3-digit number generated by an algorithm using information in your credit report. This number is used to predict risk. For example, it allows potential lenders to get an overview of your credit and make an educated guess about how likely you are to pay any obligation on time. Everyone has a credit score. In fact, everyone has 3.
Everyone has a credit score for each of the major bureaus:
- equifax
- experience
- Transunion
The middle: How is my credit score determined?
If you don’t understand all the factors that go into determining your credit score, it may seem like this 3-digit number is random. Somewhere some guys are sitting around rolling dice to determine what everyone’s credit score is. However, in reality, these scores are based on some very specific factors. In order from most to least important:
- Payment history: This includes late payments.
- Amounts Owed: The amount of debt you owe.
- Length of history: how far back your credit goes (the longer, the better).
- Types of credit used: Types of accounts you have (eg, revolving and term).
- Credit Inquiries/New Accounts – Are you opening a lot of new accounts? Are there a lot of questions coming up (this happens when you apply for new credit, and sometimes when you’re looking for a new job)?
Now that you know more about your score, we can finally answer the question “How can I fix my credit score now?”
When looking for ways to “fix my credit score now,” keep in mind that your credit isn’t chalk on a blackboard. You can’t take an eraser and just delete it in the blink of an eye. Bad reports on your score will generally remain for seven years, and bankruptcies can be reflected in your score for up to ten years.
The End: Helpful Tips to Fix My Credit Score Now
Tip 1: History is important
Unfortunately, this aspect of your score is somewhat out of your control. You can’t start building credit until you’re 18, and it takes years to be classified as “good.” This means that it is important to open some credit cards as soon as possible, keep them open and in good standing.
The part you can control is how long a card stays open once it has been approved. If there’s a card you don’t want to use anymore, instead of closing it, just save it or destroy it. Leaving the account open, as long as you are not charged an annual fee, will allow you to continue building your credit history.
Tip 2: Don’t apply everything at once
Applying for many different types of loans (for example, credit cards) in a short period of time can lower your score… as can opening a lot of loans in a short period of time. This is a pretty easy way to correct your score. Just stop taking out a bunch of loans and open new accounts.
Tip 3: Pay bills on time every time
If you’re having trouble remembering to pay certain bills, set up automatic payments so money is automatically deducted from your bank account each month. If this isn’t an option, set up automatic reminders on your phone or email program’s calendar.
Tip 4: Pay off debt
Reducing your debt-to-credit ratio by paying down debt is another way to improve your score. Paying your debt on time (as mentioned above) is critical, but if you can, you should also pay off your debt ahead of schedule. Any small amount (even just an extra $10 a month) will help you achieve this goal and lower your debt-to-credit ratio.
Tip 5: Check your credit report 3 times a year
Doing this will help you catch mistakes and fraud like identity theft.
You are entitled to 3 free credit reports per year (one from each of the major credit bureaus). You can claim your credit reports here: http://www.annualcreditreport.com.
Get a credit report every 4 months and review it carefully. Take any mistakes seriously…they could be signs of identity theft.
Tip 6: Bargain with collectors
Paying off a past due account will not automatically remove it from your credit report. If you’re only a little late, the balance is extremely low, or you’re going to pay the debt in full, you may be able to negotiate with the collection agency to have the item removed from your credit report.
For more money tips, follow the Smart Money Tips Pinterest board.