Many financial buzzwords often float around the internet. ‘Credit score’ is one of the most popular, and it’s usually talked about in one way. Everyone is keen to tell you that you need a good credit score, and if you don’t have one, then you’re in a deep pile of turmoil. So, when you run a quick credit check and see that you don’t have what’s considered to be a ‘good’ score, you think it’s the end of the world.
Relax! While a bad credit score isn’t exactly ideal, it doesn’t mean you’ll suffer until the end of time. In fact, more often than not, you can fix a bad credit score fairly easily, and see a dramatic improvement. I’m going to show you how to do this, but first, a brief bit of info on what your credit score is and why it’s important.
A Brief Summary Of Credit Scores
The best way of describing a credit score is that it’s a number you’re given based on various pieces of your financial information. Most of the time, this number will sit somewhere in the range of 300-850.
What’s considered a good credit score? Typically, anyone with a score ranging from 600-800 has a score that’s between fair and good, while people with upwards of 800 have an ‘excellent’ one.
Therefore, anyone with a score below that 600 mark is considered to have a poor credit score. The exact numbers can vary depending on how your score is calculated, but a general rule of thumb is to aim for over 600.
Why do we have credit scores? It’s a way for lenders and organizations to determine how ‘creditworthy’ we are. If you have a good score, this indicates that you’re a trustworthy individual who takes care of their finances and can be trusted to pay back any money that’s been borrowed. When your score is bad, organizations may refuse to lend you money because your financial history dictates you’re not a worthy borrower.
Consequently, it is important to try and turn a bad score into a good one as it can affect your lending. It’s also important to note that credit scores aren’t fixed, and they can move up and down depending on what you do.
Does this mean you can never get loans with bad credit? No, some organizations offer bad credit loans, etc. It’s just better for you when you have a good credit score as this generally means you’re financially stable!
How To Improve A Bad Score
There are loads of places where you can check your credit score online. If you’ve found your score is below 600, then it’s time to improve it. You’ll be happy to know there are many different ways in which you can do this!
Dispute Inaccurate Information
It’s highly possible that there’s information on your credit report that’s inaccurate or incomplete. Sometimes, these bits of info could cause your score to drop, even though you don’t think they should. As a result, it always makes sense to run a credit check-up. As it mentions in this The Credit People 2018 Review, some companies run checks for you and can help you remove lots of pieces of inaccurate data. In doing so, you will basically clean up your credit report. This means that only valuable and accurate information is on there, giving a clearer score. You may find that your new score is much higher than your old one and that the wrong information was bringing you down.
Start Paying Your Bills On Time Every Month
Late bill payments are one of the biggest causes of a low credit score. It’s such an easy indicator of whether or not you’re creditworthy. After all, if you can’t pay your bills every month, how on earth are you going to pay back a loan? Try and budget your money better so you can pay your bills and never miss a payment date.
Reduce Your Debt
Similarly, focus on paying off any debt that you own. The amount of debt you have will determine how strong your credit score is. You can still have a fairly decent score with a little bit of debt, but too much will send you over to the dark side. Again, it’s all about using your money wisely and paying people what you owe.
Pay Off Credit Card Balances
If you have any credit cards, then you need to pay off the balances in full every month. Credit cards with open balances will do two things. Firstly, they’ll turn into debt, which negatively affects your credit score. But, they also show that you’re not paying a bill of sorts on time. If you don’t pay it in full, then it seems like you’re incapable of doing so, which isn’t creditworthy.
Stop Making Credit Applications
Whenever you apply for credit, it gets noted down and forms part of your credit score. The more applications you have, the worse your score will be – regardless if they’re successful or not. Someone that’s always in need of money isn’t going to look like the kind of person you’d trust to lend money to. It speaks volumes about your financial situation and counts against you. Avoid applying for credit whenever you need a bit of money, save your applications for things that really matter, like a mortgage.
If you use these five tips, then you’ll be amazed at how quickly you can repair a bad credit score. The whole point of this article is not to scare anyone with a bad credit score. I think there are plenty of articles out there that do that already! Instead, I want to show you that having a bad score isn’t the end of the world. There’s no need to panic, and you don’t have to assume that your life is doomed because you’ll never be able to get credit.
Yes, having a good credit score is highly beneficial and important. But, if you have a bad one, then you can easily repair it and make it great!