Almost 60 percent of Americans have a credit score that sits above the 700 mark. Most of these people have absolutely no problem qualifying for mortgages, personal loans, credit cards, and more.
But about 30 percent of Americans have a credit score that falls below the 650 mark. These people have “Fair” or “Poor” credit and usually have a tough time taking out loans without facing high-interest rates. It can put them at a real disadvantage in life.
If you fall into the second category of people, you should make an attempt to learn how to fix your credit so that you can feel better about your financial future. By taking a few simple steps, you can improve your credit score dramatically and start qualifying for loans with low-interest rates attached to them.
Here’s how to fix your credit in 7 simple steps.
1. Check Your Credit Score
If you’re interested in trying to learn how to fix your credit, there’s a good chance you know what your credit score is. But you might be surprised to find out how many people have no idea where their credit score stands.
Studies have shown that about 30 percent of people are clueless when it comes to their credit score. They haven’t taken the time to figure out what their credit score is in a while.
That should be your very first step before you start trying to fix your credit. Look up your credit score and see whether it’s considered “Excellent,” “Very Good,” “Good,” “Fair,” or “Poor.” Your goal is going to be to attempt to move it up the ranks as quickly as you can.
2. Inspect Your Credit Report Carefully
Once you know what your credit score is, your next course of action should be to take a good look through your credit report. It will include all of the debts that you’ve racked up over time as well as information on missed payments, debts that may have been sent to collections, and more.
Inspect each debt listed on your credit report and make sure that you’re responsible for the debt. A Federal Trade Commission study conducted a few years ago actually revealed that about 20 percent of people have errors on their credit reports and don’t even realize it.
If you happen to come across an error, you’re encouraged to dispute it right away. Doing this will eliminate the errors and could provide you with an almost immediate boost to your credit score.
3. Catch Up on Missed Payments
Have you fallen behind on making payments to a creditor in recent months? This could take a much bigger toll on your credit report than you might think. It can drag your credit score down and make it hard for you to recover.
If you have missed payments, find a way to catch up on them as quickly as you can. This might mean taking on a second job and saving up some extra money so that you can bring your payments current. It might also mean contacting your creditors directly to work out a repayment plan.
Whatever you do, don’t continue to miss payments moving forward! It’s going to lead to you digging yourself into an even deeper hole.
4. Consider Consolidating Debt
One of the ways that you can get current on all your debt payments and make your debt more manageable is by consolidating your debt. When you do this, you’ll essentially take out one large loan to pay down all your debts at once and then repay that loan over time.
There are personal loans no credit check available to those who don’t have the best credit in the world. These loans can really come in handy if you’ve accumulated a lot of debt on a handful of different credit cards.
5. Keep Credit Accounts Open
Once you pay down a bunch of debt, you might be tempted to close some of your credit card accounts so that you don’t rack up more debt in the future.
This isn’t the worst idea in the world. But your credit card accounts will do a lot of good for your credit if you keep them open without using them.
After you’ve paid down your credit card debt completely, it’ll open up tons of available credit to you. This available credit will send you credit score soaring and make you look like a more attractive candidate to lenders.
If you really have a problem with debt and know you’re not going to be able to resist using your credit cards, cut them up and throw them out while still keeping them open. This will prevent you from using your cards while allowing you to take advantage of still technically having them.
6. Avoid Taking on New Debt
While you’re in the process of trying to rebuild credit, avoid taking on any debt at all costs. Don’t buy a house, don’t buy a car, and don’t apply for any more credit cards.
After you’ve remedied your credit issues, you can ease up on the restrictions. But for the time being, it’s best to steer clear of new debt. It’ll help you build up your credit score instead of bringing it back down.
7. Check Your Credit Score Again
About six months after you start making a push to improve your credit, go and check your credit score again.
You should have a huge smile across your face after you see what your score is now. If you don’t, it just means you’re going to need to continue to work hard to pay down debt before you see the bump in your credit score that you’re chasing.
Know How to Fix Your Credit and Do It
Now that you’ve learned how to fix your credit, you should see how simple it can be to do it. But in order to bring your credit score up, you need to stay disciplined and work to eliminate your debts.
By doing this, you’ll improve your credit score and put yourself on the right financial path. You won’t be worried every time you go to check your credit score to see where it stands anymore.
Improving your credit score is one way to save money throughout the course of your life. Read our blog to see some other money saving tips for 2019.