How to fix credit score

factors affecting credit

Useful tips on how to fix your credit score 

Credit history and score are the basic criteria for lenders when deciding whether to approve the customer’s loan application. To increase your chances of getting financial help we have written an article about this notion. This information will help you understand how to rebuild your borrower’s rating and become a reputable candidate for a loan.

Before we start you should understand that even if your credit score seems like a disaster, you can change things for better. Well, all your financial activity is traced and recorded. But the negative aspects reduce their impact with the flow of a limitation period. It means that ​​the value of your past dues will decrease over time, and the recent covering of the next loan agreement will improve the current state of the borrower’s rating.

So, let’s look closer into this topic!

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What’s considered a good credit score? 

If a person wants to improve something he or she must know how this “something” works. That’s why we should start with the basics. What is a credit score itself? It is a numerical rating based on a borrower’s payment history. It assesses the current state of the client’s payments and shows the likelihood of obtaining a new loan in the future for each individual. There are a lot of factors that influence the borrower’s rating. A good one is usually based on the active use of financial services and their timely covering.

Credit score (sometimes it is called a borrower’s rating) is calculated on the basis of past and current financial status of a borrower. It also depends on the size of the debt, the number of loans, terms, the fulfillment of loan obligations, etc. Lenders define the following credit score ranges:
0-250 – very low;

  • 250-350 – low;
  • 350-450 – medium;
  • 450-550 – high;
  • 550-700 – very high;
  • 700-850 – excellent!.

The higher mark you have, the better loan conditions you will get. What’s more, many agencies that offer financial services set harsh requirements to the borrowers’ credit score. Some of them don’t approve loan applications if a customer has a rating lower than 600 or even 650.

Why does a good credit score matter? 

Unfortunately, many people mistakenly misunderstand the importance of a high score for a borrower. In most cases the borrower’s history contains information about numerous financial services and financial services. Due to this, lenders spend a lot of time on checking and analyzing it. To solve this issue the vast majority of them take decisions as to the loan approval according to the borrower’s financial score.

If you are thinking about getting funds from a credit counselor, just look at your rating and you will understand your chances. You may be surprised, but credit score also influences the interest rate, annual percentage rate, and additional fees a borrower will be required to pay off. 

Why does it happen so? When a financial expert sends money to your banking account he or she bears risk. What if you fail to pay back your debt? What if you go bankrupt or the like? The higher risk a lender feels, the worse loan conditions and terms a customer will be offered. 

In such a way, if you want to save money and need a loan, make sure your credit score is okay. In case it doesn’t, you can wait for some time till your credit score improves. 

6 Steps to Improve Your Credit Score 

Poor credit ratings and scores cannot be erased, but they can be improved. There are a lot of aspects that can decrease your rating. The most significant ones are delays in previous transactions, missing deadlines, breaching of a loan agreement, etc. The impact of defaults made in the past will decrease over time, and the recent repayment of the loan will improve the current state of the credit score (if you repay your loan as you were expected to).

If you are thinking about applying to a specialist but have a disappointing borrower rating, we have some recommendations for you. By following them you will increase your credit score and become an appealing candidate for a credit counselor. So, here we go!

     1. Check your credit reports for errors 

Sometimes it happens that lenders that offer financial services make notices mistakenly. It can happen both because of human fault and a system failure. Anyway, it can decrease your rating considerably.

That is why you should regularly check your banking account activity. The earlier you find a mistake, the easier it will be to correct it. To get your borrower’s information, you need to leave an application on the website of one of the credit bureaus, visit their office or call a loan consultant. Analyze your report not only for missed deadlines but also for confirmation that they belong to you. You are entitled to ask a company to delete negative data from your payment record if it was recorded mistakenly and you can prove it.

     2. Fix any errors you find 

What should you look at while checking your financial activity and rating? First of all, compare the number of loans indicated in your history with the one you actually took. If they don’t match, look for “redundant”. If you found a loan that you did not take, you need to understand who gave such data to the bureau. We are looking for the “lender” or “donor of information” fields.

If no extra credits were found, it will be useful to check the status of those that are currently active. It may be that the loan was paid off a long time ago, but it is not reflected in the borrower’s records. Then, when determining your creditworthiness, the banks’ scoring systems will consider this as excessive risk, and this may affect their decision. Another thing to pay attention to is overdue. Overdue transactions are usually highlighted in red.

When applying to a lender, you will need to write a statement in which you explain the essence of the error and preferably add copies of documents confirming you are right. For example, if it is mistakenly an “overdue” or “unclosed” loan, then receipts or a certificate taken from the bank after its paying off will be needed. 

     3. Pay off credit card debt

If you don’t know how to improve your financial reputation, start with repaying your current debts. Try to pay current obligations on time, without delays or shortfalls. Even if you have made mistakes in the past, a long period of non-arrears will help change the attitude of banks. 

To avoid debt, try not to take on new obligations until you pay off the old ones. Credits, and active credit cards, and microloans are also considered. After you pay off your debts the credit score will increase. It means that if you want to apply for any kind of loan, take actions to look more reputable for lenders.

     4. Apply for a credit card if you don’t have one 

If you are not having a credit card yet, apply for it! Organizations that offer loan services usually set softer requirements to borrowers who take a credit card when compared with a full-fledged loan. A credit card has a certain limit of borrowed funds that a person can spend on purchases. If you return the money on time, it will be reflected in your rating. And if you take the issue responsibly and repay the debt during the so-called grace period, you can avoid paying interest. 

     5. Do not close old credit cards

The best thing you can do is to keep open credit cards unused. If you have opened a card for a long time or it is featured by a high credit limit, don’t close it. Otherwise, it can influence your rating negatively. By such actions, a borrower can decrease his or her rating by 15%. Luckily, the damage won’t last long.

     6. Don’t get credit if you don’t need it

If you wonder how to rebuild your score in the shortest possible time, stop applying for new credits if you do not seriously need them. Unfortunately, many people get used to taking loans and covering their needs with the borrowed money. After a while they can find it difficult to live without a financial expert.

You should understand that your credit score goes down with each missed loan covering. If you missed the payday for 30 days, it will fall once. After you miss it for 90 days, a credit score will decrease again. Keep in mind that 35% of your reliability as a borrower is shown by your rating (paid by credit card in term).

In such a way, it is pivotal to learn to live without running several loans simultaneously. Financial education is something that will help you do it. Try to manage your budget efficiently and save money for covering unexpected expenses.

How to understand you should improve your credit score 

Credit score plays an important role in the life of each person. It can be said that it is the financial reputation of a person that affects the decision of lenders whether to issue loans or credits. With a negative reputation, getting a loan is problematic, and in some cases, it is completely impossible.

Many people can live with a poor rating and don’t feel any restrictions because of it. However, if you want to take any type of loan (a mortgage, for example) you need to take care of your rating as a borrower. In fact, it is not difficult. If you repay your debts in time, you can easily have a 650 or even more. This score is considered a perfect one by the majority of lenders.

What leads to a bad credit score? 

There are nearly ten aspects that influence a customer’s reputation as a borrower. However, things are not as complicated as you may think. If the borrower fulfills all the prescribed obligations to the financial institution, then he or she won’t definitely have a poor borrower score. This number is defined due to the information accumulated over a certain period of time. In most cases it is a period of 3-5 years. The so-called passing score also depends on the loan amount a borrower owes.

If you decide to check your financial rating, remember that all these factors influence your financial rating jointly. In addition, one factor combined with another may not have the same effect as with the third. Let’s consider a simple example: one borrower fails to repay a debt for the first time, and the second one does it regularly. You may be surprised but the rating of the first will decrease more than the rating of the second borrower. 

  • Late or missed payments

Delays show lack of financial discipline of the borrower and let the banks know that they stand a risk by issuing another loan to this client. That is why a delay in monthly deposits can greatly worsen even a good rating and reputation. How much the rating can drop after a money delay depends on two criteria – the frequency of delays and the number of days of delay.

  • Applying for too many cards or loans in a short period

Trying to get a 100% guarantee to receive a loan, some borrowers send multiple applications to different financial institutions at the same time. Most people don’t understand that such actions will reduce their financial score. In fact, they most often receive several refusals and a damaged reputation. You should know that not only approved loans are displayed in the borrower’s rating, but all submitted applications.

  • Charged-off accounts

Your account can display a “charge off” status which will have a negative impact on your reputation. This phrase means that you cannot use the account in the future and still owe money. In such situations lenders can continue to report the past due amount and the balance owed. 

  • Accounts in collections

It happens when a borrower can’t repay a debt. The main objective of the specialists offering financial services is to get their money back. To make it possible a credit counselor transfers the debtor‘s account to a collection agency. It is obvious that other lenders won’t work with such a client. 

  • Loan default and bankruptcy

If you fail to pay back your debt, you will have a poor financial rating. The same happens with home foreclosures. Consequently, you won’t be able to get a loan. Even if you find such a lender, be ready to pay high interest and APR. 

Important: we have mentioned just a few major aspects that can lead to a low rating. Make sure you understand there may be some reasons for your low rating!

Can you pay a company to fix your credit score? 

If you thought the things would be so easy, we have some disappointing news for you. You cannot deal with a bad borrower score by paying to any company. However, you can get professional help from credit repair companies. If you don’t want to immerse into the details of your financial activity and prefer spending time on other matters, such companies will be entirely beneficial for you. A credit counselor can make your life much easier.

On the other hand, if you are ready to deal with a low financial score by yourself, you can do it yourself as well. Loan repair specialists usually do the same work you would do. But since they have more experience, they can help improve a financial reputation much faster. To make use of such services a borrower will be required to pay nearly 100$ each month.

Be aware of scammers 

You should remember that some entities may be cheating. Before you trust your money and banking account to a credit counselor make sure you have checked whether the company is trustworthy. 

Surf the Internet and look for websites that mention the company you are going to work with. Read customers’ feedback and pay attention to the overall rating. There are also some red flags that you must focus on. 

It is suspicious when a debt repair company:

  • asks for money before conducting its services;
  • refuses to conclude an agreement;
  • promises to delete negative notices from your financial record;
  • recommend you to specify false information;
  • advices you to change your identity to avoid repaying debts;
  • says it will increase your rating within unrealistic terms.

If you see at least one red flag, please, opt for a more reputable debt management company. Luckily, nowadays there are a lot of them to choose from. Try to be objective and realistic. Then it won’t be difficult for you to detect scammers.

Best fixing credit score companies 

If you don’t know anything about loan settlement organizations, then pay attention to the inventory of the best ones below. These providers of rating-fixing services are reliable and carefully checked. 

     1. Ovation Credit Services

It is a reputable company which can boast of more than 1 million customers. It offers free debt consultations, personalized client dashboards, 24/7 access to financial tools, and a dedicated team of experts. If you are interested in Ovation Credit Services, call 866-639-3426 or visit its website.

     2. Sky Blue Credit

Unlike the previous company this one requires a monthly charges ($79) for improving your negative financial reputation. The first 6 days are free of charge. It is one of the most reliable credit repair companies since it was founded in 1989. You can get free consultation by calling (800) 790-0445 (9AM – 7PM, Monday-Friday).

     3. Credit Saint

It is another example of a reputable debt rebuilding company. It can boast of a BBB rating and many clients. What’s more, it provides a 90-day money back guarantee. There are 3 packages a user can choose from. For more information you can call 1-877-637-2673.

     4. The Credit Pros

According to Inc. Magazine, it is one of America’s 5,000 fastest growing companies. All services are available via its website. The registration takes just a few minutes. The Credit Pros also presents 3 different options. Price ranges from $69 to $149 per month. An credit counselor is available by telephone: 800-411-3050.

     5. The Credit People

To boost a bad financial score you can also apply to this company. It has been working for more than 15 years and is featured by great popularity among the customers. To make use of it you can choose between a monthly fee ($79) and a flat rate ($419). You can visit its website or call 866-382-3410.

How long does it take to fix your credit score? 

Nobody can answer this question definitively. Everything depends on each situation. For some people a few months will be enough. At the same time, others are forced to wait for 10 years to improve their low borrower score. If a person goes bankrupt, he or she will need from 5 to 10 years to become a reputable borrower again.

If you miss your mortgage obligations for 30 days, you may need up to 3 years to cover it (9 months is a minimal term in this case). What’s more, the higher your rating was initially, the longer it will take to fully recover from the setback. 

Anyway, you will need to spend much time and effort to rebuild your bad score. Take this fact into account when applying to a credit counselor.

FAQ

Can I fix my credit score in a month?

Sorry to disappoint you but it is almost impossible. There is no particularly set period for increasing a financial rating. Everything depends on your financial behavior in the past. If you lack time and don’t know how to recover your reputation, you should better apply to credit repair companies. Professional specialists know how to make you more appealing to lenders as soon as possible. However, it will take at least several months.

Is 650 a good credit score?

650 is not the highest borrower’s rating, but in most cases it is enough for getting a loan. Many online lenders set this score as a minimal one for borrowers. However, all agencies define different financial scores that are acceptable for them. According to a loan scoring company FICO, there are nearly 70% of Americans who have a rating of 650 and higher.

Can I pay someone to fix my credit?

It seems like a good idea but it is impossible. If you want to speed up the process of improving your financial reputation, ask for help from credit repair companies. A credit counselor will analyze your budget activity and define the best strategy exactly for you.

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