Do you need fast credit repair? Read this article to learn about credit repair tips that actually work and get get yourself back on track in no time!
The economy is not in good shape for those of us in the middle class. That much does not to be said. We live it every day.
The cost of living just climbs and climbs while our wages stagnate and the income gap between the rich and the poor grows.
To offset these imbalances, the average American household takes on a tremendous amount of debt to stay afloat. Currently, the average American household owes $133,568 in debt, $15,983 of which is sitting in credit cards.
Many Americans, as a result, have been swallowed up by their debts, unable to pay them off, damaging their credit scores in the process.
If this describes you, as it describes many Americans, check out these tips to guide you towards fast credit repair.
5 Fast Credit Repair Tips
To improve your credit score you first have to understand what factors into a FICO credit score.
From there, you can actually figure out how to combat your low credit score.
Below, you will find a breakdown of the 5 main components that factor into your credit score and provide some fast credit repair tips that pertain to each category.
1. Payment History
Your payment history determines 35% of your credit score. This factor is simple: if you pay your bills – all of them – on time the better your credit score will be. How late you pay them and if any of your bills have gone to collections also factors into your credit score.
If you have a history of late payments, there is, unfortunately, nothing you can do to change the past, but you can prepare for your future, more responsible debt management habits.
The best thing you can do is get an up-to-date print out of your credit report and begin settling your debts. Pay off that collection agency, remove the lien on your house, etc.
Before you begin paying off your creditors, however, make sure to check that all the information on your report is accurate. Specifically, make sure to check for “zombie debt.” There are statutes of limitations on old debts that prevent them from being listed on your credit report.
Some collection agencies report them anyway, as a way to get your money and keep your credit score low. But since you may no longer have any legal obligation to pay the debt, you can dispute these claims and get them removed from your report.
You should also just make sure that there isn’t any information that is flatly incorrect. Stuff happens and sometimes you accidentally get saddled with a debt that doesn’t belong to you.
It’s important to note that just because you may have had a poor credit history thus far, doesn’t mean it’s permanently scarred. With time and responsible credit management, your past flubs will look less and less severe.
2. Total Amount Owed
When determining your credit score, FICO likes to analyze what is called your “credit utilization ratio.” This is a fancy way of saying that they like to see that you aren’t using an excess amount of your available credit.
For example, having one credit card with a 10,000 dollar limit, but with a balance of 9,000 isn’t going to look very good. However, a 50 dollar balance on a 500 dollar credit card will.
Having a large credit line is good, but using it all is not.
A fast credit repair tip to fix your credit utilization ratio is to open up a new credit card and not use it. This way, your available credit increases, and your balance “decreases” relative your credit limit, thus improving your credit limit. Bonsai Finance is a good resource for opening up new credit cards if you have poor credit.
You can of course, just pay off some of that credit card debt, too.
3. Length of Credit History
How long you’ve been responsible for managing loan obligations also plays a factor. Longer is usually better – as long as you haven’t been paying late – because it gives your creditors a track record of responsibility to turn to.
This is another factor in your credit report that is immutable. Only time can fix this issue if you don’t have a long credit history. A good pro-tip, however, is to never close a credit card, even if you’ve stopped using it.
Just the age of the account alone will improve your credit score.
4. New Credit
While you can improve your credit utilization ratio by opening up a new credit line, you have to be careful because your FICO score can drop if you open up too many.
In the eyes of FICO, people only open up new credit cards because they have a poor cash flow and need more spending money or a preparing to take on a lot of debt for a big purchase.
That being said, opening up a new credit line will only make your credit score take a temporary dip. If you open new accounts and pay them off responsibly, your credit score will rise eventually.
5. Types of Credit
FICO likes to see a mixed portfolio of credit in your history. A few credit cards, a mortgage, an auto loan, etc. all look good if you’ve been paying them off on time.
This shows that you know how to manage a variety of different kinds of debt and banks are more likely to loan you money for various things in the future.
To boost your score in this area, acquiring and paying off installment loans immediately is a good way to boost your credit.
Need More Financial Advice?
With these tips, you should be well on your way to fast credit repair and overall financial success. If this taste of the responsible life has you craving more money advice, check out the finance section of our website.
We have a bevy of helpful information to help you get your money in order.