Is your credit score lower than 579?
If yes, you’ve got poor credit. You’re not alone, though. About 30 percent of Americans have bad or poor credit.
The consequences of poor credit are well-documented: getting approved for a traditional loan is hardly possible, landlords can reject your rental application, and you can even miss out on a finance-related job.
If you’ve experienced any of these consequences, there’s no doubt you want to get out of your current situation. That’s where we come in.
Here’s how to repair a poor credit score.
Know What Caused Your Credit Score to Fall
Several situations can cause your credit score to go from excellent to poor. Some of these situations, like a home foreclosure or bankruptcy, will trigger a rapid fall while others, like defaulting on a personal loan, will result in a gradual fall.
So, what’s the reason behind your poor credit score?
To know this, get a copy of your credit report from a credit bureau. Scrutinize it.
If you’ve defaulted on a loan, you’ll find this information. If you’ve recently filed for bankruptcy, you’ll see it in the report.
Once you know why your credit score is poor, you can start taking measures to build it.
Get Credit Report Errors Fixed
When reading through your report, you might find errors. For instance, there could be an incorrect address, an inaccurate loan balance, or a closed account marked “open” or “active.”
Such errors can have a negative impact on your credit score. Get them fixed.
You can file a formal dispute with the credit report that issued the report or you can hire a professional, like DisputeBee, to help you. Click here to visit DisputeBee.
After the error is corrected, you’ll see an upward movement in your credit score. It could be a small move, but at least you’ll get the motivation to keep building your score.
Pay Off Debt
Loan delinquency and default is the primary reason millions of people have poor credit scores. If you fail to pay a loan, the lender will sell the account to a debt collection agency, after which it will show up on your credit report.
The only way to get a collection account out of your report is to pay off the loan. Bear in mind, though, that the account won’t fall off immediately you settle the loan. Collections accounts stay on a credit report for seven years.
This might seem like a long time, but if you hold off on paying a debt in collection because your score won’t improve immediately, you’ll only stay with poor credit for an even longer time.
Build a Positive Payment History
When you have poor credit, you probably also have a bad payment history.
Considering that payment history accounts for up to 35 percent of your credit score, one of the most effective ways to repair your poor credit is to build a positive payment history. You can do this by getting a secured credit card or a personal loan for bad credit, and then paying up on time.
You Know How to Repair Poor Credit
Poor credit can take a toll on your financial life and keep you farther from your dream to achieve financial freedom. The good news is it’s not a life sentence. With this guide on how to repair poor credit, you now know the measures you should take.
Good luck and keep reading our blog for more tips.