Credit repair is like losing weight. It is a process that takes time and with no quick ways to fix it. Doing away with the negative information on one’s credit report and trying to catch up on due bills from the past is the best way to begin rebuilding bad credit. But it doesn’t happen overnight. When one has a credit score with good levels, they qualify for credit cards and loans as well as better interest rates. An individual with bad credit history, on the other hand, must prove to lenders and new creditors that they can manage credit responsibly and will not default the new applications if they are approved.
A credit score is used to measure financial health. Like health, it can either be good or bad. The scoring system ranges from 300 as the lowest possible score to the highest score of 850. A score ranging between 750 and 850 is considered an excellent rating while 700 to 749 is regarded as a good score. A fair score is between 650 and 700. A score between 300 and 649 is considered a bad credit score.
The following are ways on how to rebuild a bad credit:
Get new accounts
Bad credit usually comes on the tail end of maxed out credit cards and late loan payments. It’s a situation which makes it difficult to be approved for further lines of credit and loans – but this is precisely what you need to do if you want to improve your credit score.
Luckily there are options available to help those with bad credit get on the path to a credit rebuild. One choice to explore is bad credit personal loans provided by short-term lenders. As the name implies, these loans are specifically designed for those with bad credit, typically requiring little more than a checking account and a steady source of income for approval. There are credit cards with a similar arrangement, wherein a person agrees to a higher interest rate due to their low credit score.
Developing better credit habits
To repair a less than stellar credit history, one has to change the practices that led to a bad credit score in the first place. It is important not to charge things one cannot afford to pay within a month. Credit repair requires staying below the credit limit as well as paying credit card bills on time and preferably in full.
Pay on time for everything
Payment history is a significant component of obtaining a better credit score. Even when a payment is not on the credit report, it is necessary to pay it on time to improve one’s score. Importantly, avoid failures on any accounts including the small ones such as school lunch, library fines, and medical bills. Currently, more organizations are using the services of collection agencies to go for their unpaid client accounts. If an account goes to such agencies, it will be reported to the credit bureaus which in return will harm one’s credit report for seven years.
Replace bad credit with proper credit
The last step is to put all the good credit habits to work. One has to show creditors that they have what is required to create a better credit score before they can improve the bad credit. Hence, for one to build their credit score to that of 700 and above, they must charge what they can afford as well as paying their bills on time.