Your credit history can play a large role in your life. It can affect your ability to get a house, a car, or even a credit card.
If your credit score is too low, you may have difficulty getting approved for anything at all. However, getting approved for a loan with a bad credit history could be worse. For example, you may get approved for a loan but only if you accept exorbitant interest rates and jacked up fees.
If you find yourself in this category, don’t despair just yet. We can help. Check out these credit fixing tips to get your credit score back on track fast.
1. Understand Your Credit Score
The first step in learning how to fix credit fast is understanding why you have bad credit in the first place. While financial emergencies can negatively impact your score, credit history is established over several years of financial transactions.
There are certain things that can drag your credit score down over time. For example:
- Paying your bills late
- Letting debts go to collectors
- Maxing out your credit cards
- Having a high debt-to-income ratio
- Letting your home go into foreclosure
- And more
We recommend acquiring a copy of your complete credit score through the three credit bureaus (Experian, TransUnion, and Equifax) and going through it line by line.
2. Pay Your Bills on Time
As noted above, late, past-due, and unpaid bills can drag down your credit. Naturally, one of the best rebuilding credit tips is to make sure you’re never falling behind on payments.
Nearly 80% of Americans live paycheck to paycheck. If you’re in this category, we understand that situations occur in which paying your bills on time can be difficult. To avoid this we suggest three solutions:
- Cut back on monthly expenses
- Earn more money
- Set your bills up on automatic payments
Fixing credit fast will require hard work and making sacrifices.
3. Pay Off Debt
Part of what’s killing your credit is probably your debt to income ratio. This number is determined by your monthly income versus the amount of you pay toward debt. For example, if you make $3,000 a month and pay $1,500 a month toward debt, your ratio is 50%.
A good debt to income ratio is considered anything below 36%. Since your mortgage is included in this calculation, a 36% or lower ratio can be difficult to achieve.
The more debt you can pay off, the less money you’ll have going out each month toward those payments. This can substantially improve your credit score.
4. Consolidate Debt
In some cases, people can’t simply pay off their debt. They have too many other financial obligations. In this case, it may be wise to find ways to make more money.
However, if that’s not an option or you want to double down on your efforts, you can get a debt consolidation loan. A debt consolidation loan assumes whatever debts can fit inside your limit. Ideally, you want the debts with the highest interest rates to be absorbed.
This can lower your total monthly payments and reduce the amount you’re paying toward interest. If you have trouble getting approved, it may be worthwhile to look into bad credit loans for people in your situation.
5. Dispute Inaccurate Discrepancies
No system is perfect, including the system that keeps track of your credit history. It’s possible that inaccuracies on your credit report are dragging your score down. In this case, it’s vital to correct these errors.
Disputing inaccurate discrepancies is one of the most important credit fixing tips. It may take some leg work, but the credit bureaus most provide you with the necessary information. You can track down the party who provided inaccurate information and contest the issue.
6. Don’t Max Out Lines of Credit
Another common mistake people make that damages their credit is maxing out their credit cards and other lines of credit. For example, if you have a $4,000 limit on a credit card and a balance of $3,900, it’s not good.
This shows the credit bureaus that you’re willing to borrow as much money as possible and put forth little effort toward paying it back. Sure, you’ll make the minimum payments, but those mostly covers interest rates.
7. Keep Unused Credit Cards Open
When people finally pay off credit cards, they tend to destroy them. Cutting up and canceling a credit card in a ritualistic manner helps people feel liberated from the debt that once enslaved them. However, doing so can actually hurt your credit.
Remember, credit bureaus like to see that you’re financially responsible. Keep the credit card, but maintain a low balance that you can pay off every month. This is one of the most important tips to rebuild credit.
Each time you charge the card and pay it off in a timely manner, you get positive points toward your credit report. Moreover, using a rewards card can help you build points to help pay for gas, vacations, and more.
8. Avoid Multiple Credit Inquiries
If you’re trying to apply for a new loan or credit card, one of the best credit fixing tips is to avoid multiple credits pulls or inquiries. Soft inquires to check credit scores are fine. However, hard inquiries can drop your credit score as much as 10 points each time.
Furthermore, studies show that people with six or more hard pulls are eight times more likely to file bankruptcy. Credit bureaus pay attention to things like that.
9. Consider Getting Financial Counseling
Lastly, one of the most preventative tips to improve credit is learning how to manage your finances better. Don’t feel bad. As mentioned above, most of the population lives paycheck to paycheck.
However, learning to avoid getting yourself into tight financial situations can greatly improve your credit score, now and in the future. Be open to financial counseling.
Looking for More Credit Fixing Tips and Other Advice?
If you’re looking for more valuable advice about finances, such as credit fixing tips, be sure to check out some of our other articles before you go. Our blog is dedicated to helping people solve life’s day to day problems.
Good luck on your journey to financial freedom and higher credit scores!