10 Sensible Ideas on How to Fix Bad Credit

How to fix bad credit involves rebuilding statistical trust in your ability to carry the weight of your finances. Little mistakes can hurt our credit scores in a big way and not successfully managing whichever money we have coming in can prove to be very harmful to our long-term reputation. Do you have bad credit?

Here’s how to fix bad credit, step by step, by doing things right:

1. Look at your credit report

In order to fix bad credit, it’s important to look first at your credit report. Through TransUnion or Equifax, you can obtain a free copy of your credit report. Call and ask, provide your address, and in a week or two, you’ll have it in-hand to review.

The information contained in your credit report may identify easy opportunities to pay off debt or outline some debts you may not be aware of are affecting your credit score. It’s the best place to start.

2. Dispute any errors

If you identify errors in your credit report, dispute them immediately. Certain errors can weigh heavily on a credit score. If you have collection accounts or judgments against you that you believe shouldn’t be there, dispute them.

If the creditor agrees to remove it from your account, this information is removed from your credit report and within a few months, you may see your score improve significantly.

3. Commit to paying bills on time

No late payments. Every credit account receives their payment on time, with the minimum covered. No exceptions. However you have to work your budget and paycheques, if you do this, you will be well on your way to fixing bad credit simply by establishing that you pay on time. If you’ve got to pay a bill late, be smart about which one. If the account’s listed on your credit report, that’s not the one to pay late!

4. Credit utilization fix

The recommended rate of credit utilization on a credit card is 30% or less. This utilization suggests you’re using credit responsibly and paying it off. If your credit cards have more utilization, adopt strategies to reduce it to 30%.

If you can’t pay down a chunk of your existing credit card debt today to bring down your credit utilization to something more manageable, consider some type of payment plan to do so.

5. Pay outstanding balances

Employ a bare-bones budget. Free up as much cash as you can or sell something. Accumulate money quickly that you can move these to outstanding balances. This is a short-term kick to essentially get you off on the right foot, to increase your credit score, and to help get you on the path to long-term financial planning.

Even if you have to sacrifice and part with money that otherwise would stay in your pocket, make the move to pay down those balances.

6. Start with high-interest or new credit accounts first

Minimize the interest you have to pay to credit accounts by focusing on those with the highest interest. You will also want to prioritize by age of account. Older credit accounts have high value. When you increase average length of credit, you’re helping your score. As you pay off high-interest accounts as well as newer credit accounts, you are smartly tackling the credit you’re working with and that will be reflected in your final credit score.

7. Do you need a low-interest loan?

If there’s no possible way for you to tackle high-interest credit accounts, you may wish to ask for a low-interest payday loan. Ideally, the payday loan would be one lump sum to cover all credit accounts and pay everything off.

Although this would leave you with the same amount of debt, the interest rate will be lower and it’s much more manageable paying off a single account, instead of spreading around your money to multiple accounts with no hope of paying it off fully.

8. Should you jump onto your spouse’s credit?

If your spouse has a credit card with a great payment history and little to no balance, if you’re added as an authorized user, you instantly benefit from that card’s payment history and any available credit. This doesn’t solve anything from a financial perspective but in terms of fixing a bad credit score, it’s another sound strategy that can help give you a boost to where you’ll hopefully eventually end up arriving on your own.

9. Do not shut down your older credit cards

The age of your credit history has an impact on your credit. When you close down an old credit card, you lose that legitimacy and believe it or not, even if it’s fully paid off, it will affect your number. Hang onto your older credit cards and if you have to get rid of anything, get rid of your newer cards first.

10. Be patient

All of this effort to fix bad credit isn’t going to instantly produce a result. Unfortunately, it will take months and even years to fix bad credit. That doesn’t mean you shouldn’t, of course. Stay focused, committed, and patient. By following your payment plan and being smart about investing your paycheque, you can slowly get yourself up to zero. Remember, plenty of people have gotten themselves into $1,000s worth of debt and have paid it off. If you’re determined, you can too.