Is your credit score low? Here are the top three tips to repair your credit fast

In today’s world, living with bad credit can present a lot of challenges. In addition to paying back the money you owe to debtors plus the added cost of massive interest rates, bad credit scores can affect your financial relationships with a variety of  institutions. It becomes difficult to rent a home as well as the interest rates for other loans or credit cards are pushed up even higher.  Many utility companies check your credit score to determine your financial risk. That’s right, if you’re living with bad credit, it can be harder to get your electricity turned on. Some utility companies require a deposit with a lower credit score. There is a solution however, in the form of credit repair.

What is credit?

Credit is a term that gets thrown around quite a bit, but what is it? Credit is a form of borrowing money that’s been institutionalized by banks and lenders and is widely accepted as a form of payment. When opening a credit account or taking out a loan, an amount of money is specified by the institution from which you’re borrowing, as well as repayment terms and interest rates. Repayment terms dictate the time frame over which you’ll pay back the loan, and interest rates determine what percentage of the amount you owe will be added to the initial cost.

Credit can be issued in the form of a credit card, which can be used like a debit card or cash when making day-to-day purchases. Credit can also be issued in the form of loans, which can be established for various purposes, like paying for higher education, funding a personal project, or making big purchases like cars or houses.

When you take out a loan, whether a big loan to buy a car or a small purchase on a credit card, you’re obligated to pay that money back. The way in which you proceed in paying the money back has a huge effect on your credit score. Paying debts back too slowly or not at all can severely damage your credit score, and in doing so, drive up interest rates on future loans and make daily life harder. If your credit score has dropped, it may be time to seek out credit repair.

What is credit repair?

Credit repair is the process of fixing your credit through good practices. Many institutions offer credit repair services, but there are some steps you can take to repair your credit on your own. Firstly, run a credit check on yourself. Most credit reports offer very specific information about your credit score, and thus are a great starting point. These resources can help you narrow down what kind of credit repair you’ll need. There are lots of resources online that offer both free and paid credit reports. It can help to get a few reports from different resources to ensure that you’re seeing all of your credit information.

Once you have your credit reports, start by looking for information that doesn’t seem right. Any information that is inaccurate can be disputed with credit bureaus. Make sure you have information to back up your dispute; otherwise the credit bureaus may not take your dispute seriously. If your dispute is accepted, the credit bureau will investigate your claim, and if they agree, will make the necessary changes and update your credit score to reflect your new score.

Allow the agencies 30-60 days to post and reflect any new changes from successful disputes. When you subscribe to a tracking service, free or paid, they will update your report every 30 days. You can check your score as many times as you like without it counting against you in the form of an inquiry.

Once you’ve handled incorrect information on your credit report, the next step of credit repair is to catch up on past-due credit bills. Payment history makes up 35% of your overall credit score, so owing money on past-due bills is extremely harmful to your credit score. Pay these bills up to date as quickly as possible, and get back on your regular repayment schedule. If an account isn’t paid up within 180 days, it can be charged off, which is one of the worst things that can happen to your credit score. Keep up on paying your balances, and your credit score is sure to rise.

Another important part of credit repair is keeping the ratio of current debt to maximum credit as low as possible. That means keeping your credit card balance as low as you can. Maxed out credit cards reflect poorly on your credit score, so paying off as much of a credit card as you can will help to repair your credit. In addition to the help to your credit score, a lower principal balance means you’ll be charged less interest, which can also help tremendously in bringing down the total amount you owe. The less you owe, the less you’re charged for owing! 

When calculating your credit score, agencies factor in what percent of use you maintain. Any amounts over 50% is considered too high while not using the cards at all is considers too low. It may sound absurd but you must use the cards and be diligent in paying off the balance every 30 days. 

As strange as it may seem, getting more credit accounts can help in repairing your credit. Diversity in your credit portfolio reflects well on your ability to borrow money successfully. Be careful though, it is important to get the proper advice when considering this plan. Having more accounts can increase the temptation to spend more. Think of the new accounts as your second chance to prove that you’re worth loaning money to. Use the new accounts wisely, keep balances low and bills paid on time, and you’re on your way to reestablishing your credit score.

Keeping up with credit repair

Once you’re back on the road to good credit, it’s important to take consistent steps to ensure that you keep your credit score high. Here are some tips on maintaining a good credit score:

  • Before making a purchase on a credit card, be realistic with yourself about the purchase. Buying something with a credit card only makes it more expensive, unless you can pay it off before you’re charged interest. Could you afford to make the purchase if you didn’t have a credit card? If not, can you pay for the purchase in a reasonable amount of time considering your income and the other bills you’re paying?
  • Keep tabs on your credit score! It’s great that you took initial steps towards credit repair, but make sure you’re staying focused on the right parts. Many of the free credit score utilities offer a new credit check on a monthly basis. Make sure you keep checking your score so you can keep prioritizing problem areas. If you’ve caught up on a past-due account, focus your attention on an account with a higher balance or a higher interest rate. Make sure you don’t neglect your other accounts in the process though!
  • Don’t be afraid to use credit. If you’re struggling with bad credit now, paying down your credit accounts and then closing them might seem like an appealing idea. However, your credit score is important to so many facets of daily life. Instead of closing out all of your credit accounts, consider changing the way you view credit, because closing accounts will lower your credit score. As stated above, keeping balances low and bills paid on time is the best thing for credit repair. That doesn’t mean you can’t use credit, though. Just make sure purchases you make are within your means, and only make purchases you can’t afford if it’s an emergency.

You’re perfectly capable of repairing your credit. It may be a struggle at first, but it will be worth every bit of effort you put into it. Remember, credit repair can be a long and arduous project, but the hardest part is getting started. Changing your attitudes about credit and the way in which you use it is a terrific way to jump into credit repair. Remain practical, keep focused, and you’ll be well on your way to a good credit score in no time!