Credit Repair Explained

Financial crisis, whether a result of joblessness or mismanagement of resources, pushes the person into scenarios that often hamper their credit score. Factors such as failing to stick to the credit agreement, missing repayment of credit card or loan payments or late payments – all have a potentially damaging impact on credit score. En masse, bad credit score due to any reason impedes consumer’s ability to borrow for future endeavors. That is the reason why, more often than not, people are found pondering how to improve credit score, despite the availability of numerous companies claiming to resurrect their financial profile.

Impacts of a Low Credit Score

Having a low credit score may cause a number of issues, with some of the major ones being:

  • Difficulty in obtaining property and auto loans
  • Need of security deposit to avail phone, cable and electricity services
  • Rejection in employment screenings
  • Difficulty in obtaining the approvals required for a startup
  • High premiums on insurance
  • High interest rate on all types of loans
  • Denial for new credit cards

In a scenario where an individual is tagged with the label of “bad credit score”, it may remain linked to their credit report for as many as 7 years! Therefore, those with a low credit score must not waste any time in starting the rebuilding process.

How to Improve Low Credit Score?

This question is one of the deepest concerns of those who haven’t been able to maintain a healthy credit score, and are now paying the price in the form of loan denials, high insurance premiums and interest rates, and other such issues. In order to repair credit score, they need to bring in deep rooted changes in their financial behavior, besides ensuring there are no inaccuracies in their credit report. To, help, here is a step by step guide on the right approach to credit repair.

Clear Outstanding Debts

Repaying credit card bills and any other outstanding loans availed is one of the fundamental requirements for effective credit restoration. Even if a person starts paying off debts in parts, it eventually starts making a positive impact on FICO credit score. In addition, rather than going for “settlements”, always opt for complete repayment.

Setup Payment Reminders

Timely bill payments is another factor ruling the success of credit repair efforts. In order to ensure timely payments, it is advisable to set up auto debit on your card and loan payments, or create reminders on any portable device. Auto debit, however, if advisable only if you consistently maintain enough funds to make up for the payments.

Use No More than 2-3 Credit Cards

Using numerous credit cards is almost certain to backfire. More credit card means rising your credit limit, which will stop the lender to give you more credit or loan in future. Therefore, if you have more than a few credit cards, it is advisable to surrender the ones you consider disposable. In addition, if you have an EMI on any of your credit cards, try to maintain at least 30 percent credit limit.

Build a New Line of Credit

Contrary to common notion, building a new line of credit by opening a banking or credit account and managing it responsibly also improves credit score. By following this approach, individuals are able establish their trustworthiness as a borrower, which in turn helps them to obtain credit cards and loans in the future.

Periodically Check Credit Reports

In order to maintain a healthy credit score, periodically check your credit reports from all three major credit bureaus (Experian, TransUnion, and Equifax). During the recent few years, numerous people have reported cases of major inaccuracies in their credit reports. Therefore, if you have a low credit score, before anything else, make sure your credit report has no inaccuracies.

Start the Credit Rebuilding Process Today

Consumers facing serious questions of how to improve credit score can follow the above mentioned steps to start the rebuilding process. It is however important to remember that even though there are no short term solutions to the bad credit, if you follow the right approach, in most cases, the damage is easily addressable. Should you wish to learn more about how to improve credit score, feel free to connect with one of our consultants.