How to fix my credit may be something you’ve considered and can be difficult for a person who does not understand creditworthiness.
A person who has never had credit or someone with a long history of credit can be in the same place if they have a poor credit score. Understanding your creditworthiness e is a big first step to increasing your credit score.
Read on for a step-by-step guide to understanding your credit score and learn the answer to your question of how to fix my credit score?
Disclaimer: In the name of full transparency, please be aware that this blog post contains affiliate links and any purchases made through such links will result in a small commission for me (at no extra cost for you).
Know Your Credit Score
The first big step in understanding your credit score is knowing the ranges for credit.
The highest possible credit score is 850. Equifax uses the BEACON score model of ranges between 280 – 850.
The Experian credit score uses FICO with scores ranging from 300 – 850.
An excellent credit score under FICO ranges from 720 = 850.
The Transunion credit score uses the Empirica model with scores ranging from 300 – 850.
The lowest credit score a person can have is 300.
A good credit score range is 690 – 719.
Fair credit scores are between 630 – 689.
And scores below 629 are considered poor credit.
Knowing your credit score range is the first key step to improving your credit score.
What Is The Most popular Scoring Model?
FICO is the most popular of the three models. Many companies use this model when determining the approval of a loan.
Companies like Credit Karma who also keep track of your scores use the Vantage model which may not always align with the big three tracking companies.
Big companies will often compare your three scores from Equifax, Transunion, and Experian to see if there is a difference that needs to be addressed during the loan process.
Order Your Credit Report and FICO Score
You can order your credit report from Experian, Equifax, and Transunion anytime during the year.
Regular tracking of your credit report will help in keeping it error-free from bills you have already paid, any liens you may need to know about, any reasons why an account is closed, or balances that may need to be addressed and paid.
These three main credit score tracking bureaus offer you a free credit report two times each year by calling 877-322-8228 or visiting the website annualcreditreport.com.
Make a habit of checking your credit report to help with fixing your credit score.
Know The Three Main Companies Who Keep Track of Your Credit Score
Know The Types of Credit You Have On Your Credit Report
There are five different types of credit that may appear on your credit report.
Trade credit is used when a supplier provides credit to a buyer for goods and services.
Trade Credit Consumer Credit is a financial agreement between the buyer and seller for goods and services that the buyer will pay for at a later date.
Bank credit is the amount of credit that has been given to an individual from a bank.
Revolving credit is when a limit is restored as the customer pays off his debt.
Credit cards are n example of revolving credit. As you pay off your debt, your credit limit returns to the agreed-upon initial amount.
Open credit is a financial agreement between the lender and the borrower that allows the borrower to repeatedly access a certain determined credit limit as the funds are paid off.
Keep Balances Low On Credit Cards and Other Revolving Debt
Keep your credit card and other loans with a low balance to improve and fix your credit score.
Pay off loans with high-interest rates.
Also, pay off loans with a high balance first to improve your credit score.
High balances on your credit score will usually decrease your credit score range
Pay Off All Debt On Your Credit Report
Paying off all your debt is one of the easiest ways to improve your credit score.
Work with your creditors to get a payment arrangement.
Call the companies listed on your credit report and tell them you want to begin an arrangement to settle your debt.
You may be surprised at how much money they are willing to subtract from the amount that you originally owed in order to get a payment.
Explain to them how you got behind. The most important thing is to develop a positive relationship with your creditors so you can fix your credit score.
Don’t Close Unused Credit Cards
Do not close any unused cards, particularly if you have little to no credit history.
Closing unused cards will eliminate the little history you have.
Unused cards can sometimes help maintain your credit score until improvements can be made through other purchases, loans, or paying off debt.
Don’t Open New Credit Cards You Don’t Need
Do not open new credit cards that you do not need.
Most people with excellent credit pay in cash with little to no credit cards.
Cash is something that is immediate when it comes to paying off items you owe.
When there are minimum unpaid credit cards on your history, your credit score will increase.
Credit companies look to see how many credit cards you have on your account.
Revolving credit is a sure sign of a person who will always be in debt.
Keep revolving debt on your credit report to a minimum so that you can finally pay all your debt.
Pay Down Bills With High-Interest Rates
Check your credit report and your statements for the bills that carry the highest interest rates.
These are bills that must be paid off first. A high interest tells a loan company that you are dealing with bad debt.
A person with great credit will not have high-interest rate loans.
A high-interest rate also means that you are paying more money than necessary on a loan, credit card, or other types of bill.
Pay off those high-interest charges first to improve your credit score.
Dispute Any outstanding bills That You Have Paid Off or Settled
Dispute anything you see on your credit report that has already been paid.
Credit tracking companies will often leave a charge on your credit report for 7 = 10 years.
Dispute anything that needs attention t get the charge taken off your credit report.
This will help to increase your credit score to a higher range.
Each company has a place where you can begin a dispute.
Experian, Equifax, and Transunion will investigate a dispute and let the company know the reason for the dispute.
Each company will give the creditor time to respond.
If there is no response during the time limit, the unpaid charge drops off your credit report.
How To Fix My Credit Score If I Have No Credit History?
If you are a person who is beginning to create a credit history, then you are in the best shape of them all.
Controlling your spending is a key factor that you will need to learn early in life.
The sooner you learn to save money and not purchase unnecessary items, the better off you will be.
Remember that major purchases like a car, student loans, credit, or debit card charges will be shown on your credit report.
These charges will be turned into a credit score by each of the main three credit score tracking agencies.
These credit scores will likely be on your credit score for most of your life. Make on-time payments for all major purchases and any other bills that are on your credit report.
Companies look at your payment history for on-time payments.
This helps them in determining your creditworthiness.
If you are going to be late on a payment, call your creditor and work out a plan.
Creditors are always willing to give you the benefit of the doubt if you at least try to communicate with them.
Get a variety of credits on your report.
You may have a mortgage, a student loan, an auto loan, and a credit card.
This will help increase your credit score. Purchase slowly and do not get multiple credit cards that you are unable to pay off.
How To Fix My Credit Score When My Wages Are Being Garnished?
Garnished wages do not look good to a credit company that is trying to approve a loan.
It also does not look good on your credit report. These issues must be addressed immediately.
Once the garnishment company representative calls you, do not try to hide from them.
It will only create more chaos on your credit Call the representative immediately and work out a plan with them.
These companies only want to get the matter resolved and move on to their next client.
They will often give you a giant settlement plan just to say that you have paid off your debt.
A garnishment can drastically decrease your credit score, so work with your creditor and get a payment plan as soon as possible to help resolve your debt.
How To Fix My Credit Score If I Have a Bankruptcy?
Bankruptcy is another critical item that needs to be immediately resolved.
Bankruptcy indicates poor creditworthiness and will drastically decrease your credit score.
Talk with your creditor to get the issue resolved.
This will show creditors that you tried to work with them to resolve your debt.
Once the bankruptcy has been paid off, you can begin rebuilding your credit by making on-time payments on future credit purchases.
How Much Will A Negative Item Affect My Score?
Negative items on your credit report can drastically decrease your score.
Late payments can decrease your credit score up to 110 points.
Debt settlements can decrease your credit score up to 125 points.
Foreclosures can decrease your credit score by up to 160 points.
Bankruptcy can decrease your credit score by up to 240 points.
Collections on your credit report can decrease your score by up to 110 points.
A hard inquiry can decrease your credit score by up to 15 points.
Staying away from these types of problems will help you, in the long run, to understand how important it is to make on-time payments and create an excellent credit score.
What Does A Bad Credit Score Mean During Purchasing a Major Item?
A poor credit score means higher interest rates, more time added to the life of the loan, a loan being denied, continued credit problems that could last for years, and a long time in rebuilding your credit to an acceptable level.
A poor credit score can create a lifetime of credit problems which means you don’t get the things you deserve.
Poor credit is like an avalanche snowball effect that only gets bigger if the issue is not addressed and resolved.
How Is My Credit Score Calculated?
Your credit score is calculated by using a basic formula.
These include your payment history, the length of your credit history, the types of accounts you have, and your used credit versus your available credit.
This is a basic step-by-step guide and the answer to how do I fix my credit score?
Understand your credit score range, dispute any errors on your credit report, know the three main companies that track your credit score, understand how many points can be lost according to what you have on your credit report, and use various types of credit for a better credit score.
Remember to do your research and constantly assess where you are with your credit.
Order your free credit report from annualcreditreport.com or call 877-322-8228, pay all f your bills on time and pay all your debt on your credit report to improve your credit score.
These suggestions will help you to improve your credit score and fix a problem that has been plaguing you for years.
There are a variety of steps you can take to fix your credit. We recommend subscribing to The Credit Score Blueprint blog to stay updated on the latest tips, tricks, and techniques.