How to Fix My Credit – 2017 Guide
If you are wondering “How to fix my credit score to get easy loans”, then our guide is all what you need to read.
Credit scores, for better or worse, are one of the top deciding factors for what loans you qualify for and the interest rate you will pay. A better credit score secures better loans at a lower interest rate, which can save thousands of dollars over time. A good credit score also makes it possible for you to buy a home and other large purchases.
It’s rather unfortunate that borrowing money hinges on this number. Ultimately, it’s just a number to judge a consumer’s credit at a point in time, as a gauge of how likely the consumer is to repay the loan on-time. Simplifying all of a consumer’s credit history down into a single number is often overly simplified–and also inaccurate. Therefore, it’s extremely important to understand what goes into a credit score, and then how credit repair really works, to make sure that your credit score is a more accurate reflection of your credit worthiness.
Even 20 points can make a huge difference for what you pay. For example, someone with a score of 659, at today’s rates, could get a 30-year mortgage at 5.3% interest. But with a 680 score, that interest becomes just 4.7%. That’s almost $1,000 saved in interest every year, or $30,000 saved interest over the lifetime of the loan. And just because of an extra 20 points!
Takeaway: Credit scores are an important but imperfect measure of credit worthiness. Even a small credit score increase can save thousands of dollars, making it a good investment to improve your credit score.
How Your Credit Score is Calculated
The most common credit score used is the FICO score (from a company called FICO), which assigns a score from 300 to 850 for consumers. As a general rule of thumb, a score over 740 is considered excellent credit; you will qualify for the best loans and rates with such a score. For any score below 650, you’ll need to pay very high rates on loans and credit cards, if you qualify at all.
3 Important Factors For Your Credit Score
The most important factor in determining your score is your payment history, which is just the record of whether you’ve paid your bills on time. Therefore, it’s extremely important to pay your bills on time. If you cannot do this, then it’s not worth the money at this point to seek a credit repair service. Rather, focus your time on decreasing your debt to credit ratio, and ensure that you can pay your bills on time. See our article on How to Get Rid of Credit Card Debt if this is a problem for you.
The second most important factor is how much credit you are using versus how much credit you have available to you. This is called your “utilization ratio” and it’s best to have this as low as possible. For example, if you are able to borrow $20,000 with your credit cards (by summing up the credit limits of all of your cards) but currently you have only $1,000 in debt across all of your cards, your utilization ratio is only 5%, which will be good for your credit score. Strive to have a utilization ratio below 30%.
The final important factor is the length of history that you have available. This is determined by the average age of your accounts, in addition to when each was last used. So, for your oldest credit cards that you have, make sure you do not close them and instead use them regularly. Also, avoid opening new credit cards too often. For example, some people will have a monthly recurring subscription charge on their oldest credit cards, just to ensure that they continue to be used.
Takeaway: If you don’t do anything else, do these 3 things: 1) Pay your bills on time 2) Have a low utilization ratio 3) Keep your oldest credit accounts open.
Other Factors That Affect Your Credit Score
There are a few other factors that affect your credit score and help you get rid of your biggest concern “How to fix my credit score”, though not as much as the ones we just talked about. Related to the last point, it’s important not to open too many new accounts too quickly. Opening a bunch at once will hurt your credit score.
It’s also good to have a mix of different types of credit, not just credit cards. For example, having a car loan, student loan, or mortgage will let lenders see that you are capable of paying back credit in a timely manner across a variety of different types of credit.
Takeaway: If you want to do more, do these 2 things: 1) Do not open too many new accounts quickly. 2) Have a mix of different types of credit.
How Credit Repair Works
Knowing how credit repair works is imperative to find the answer of your question- how to fix my credit score and have a satisfactory credit rating.
The Federal Trade Commission recently found that one in five consumers have at least one credit report with errors. Credit repair is not about faking your financial history or doing tricks to try to increase your score. It’s all about pinpointing issues in your credit reports and fixing any erroneous details in them. These errors occur because there are many sources providing the data that powers your credit score.
Before deciding that paying a credit repair company to fix your credit score is the optimal solution, it’s important to understand how credit scores are calculated and how credit repair companies actually work. The sad and unfortunate truth is that many credit repair companies are SCAMS. They will take your money without giving you anything to show for it. But, the best credit repair companies have a deep understanding of the rules surrounding credit score calculations and credit repair. They know the best ways to raise your credit score legitimately, or give you a money back guarantee if you are not happy with the service providers.
Ultimately, there’s no quick fix when it comes to credit repair. Whether you do it yourself or go with a company, it will likely take months before you get your credit score to a place you’re happy with. This is why credit repair companies charge by the month. They realize that it’s often an ongoing process.
The best credit repair companies may do multiple things to help you:
- Dispute mistakes on your credit reports. This is the #1 thing that a credit repair service can help you with, because they’re very experienced at navigating the dispute process. They will also save you time and energy needing to research how to do it yourself.
- Provide you with financial tools and tips to fix other areas of your credit score. Not all of your savings will come from disputing mistakes. There are probably simple things you can change such as developing a plan to pay down your debts and creating a specialized plan based on your unique financial situation.
- Credit monitoring. This is often an add-on, but it monitors your credit report to ensure that there is no negative information that could affect your credit score. Additional uses of this include protecting you from identity theft or credit card theft.
While it is undoubtedly possible to repair your credit yourself, it often also pays to choose the right credit repair service to expedite the process for you, and to ensure that you are taking the correct steps to increase your credit score. Ultimately, the best credit repair services have seen hundreds of thousands of cases, and they know all of the nuanced rules that go into creating a credit score.
Takeaway: It is absolutely possible to repair your credit yourself, but having an experienced professional will probably save you a lot more time and money.
Hope Our Guide Must Have Helped You to Stop Deliberating Over “How to Fix My Credit Score” and Understand the Best Ways to Earn Credit Worthiness. Ready to Find a Credit Repair Company?