About 30 percent of Americans have bad or poor credit.
If you’re one of these people, you’ve certainly made a couple of financial mistakes in the past. Maybe you defaulted on a personal loan, skipped a utility bill payment or even failed to settle a credit card balance. Consequently, these accounts ended up on your credit report and your credit score took a hit.
Bad credit can make yourself miserable. Getting loans at good rates is hardly possible.
The good news? You can rebuild credit fast.
Continue reading to learn about some of the most effective steps you can take to climb out of bad credit.
Fix Errors on Your Credit Report
Did you know one in five Americans find an error on their credit report?
You’re probably wondering why you should care about errors on your report, right? Well, an error can have a big impact on your credit. If your report has an account for a defaulted loan you never took, for instance, the credit score on your report isn’t accurate.
As such, one of the best ways to rebuild your credit is to comb through your credit report and establish whether there are any errors. Examples of common errors include:
- Wrong name or address
- Accounts with an incorrect balance
- One account appearing multiple times
- Accounts with incorrect payment history.
So, how do you fix a credit report error?
Simple. File a dispute with the credit bureau that issued your report. It will investigate the issues and fix the error. Depending on the nature of the issue, your credit score could climb.
Build a Positive Payment History
Your payment history makes up 35 percent of your credit score.
If you’ve got a poor payment history – perhaps you’re ever late on your credit card and loan payments – your credit score will drop. It’s for this reason building a positive payment history, after a period of racking up a negative history, can make a quick difference in your credit rebuilding efforts.
To build a positive history, start by repaying the loans in default. You can negotiate with your lenders for repayment terms that suit your current financial situation.
You can even take out a consolidation loan if you’ve got multiple loans in default. However, ensure you know how this step can affect your credit. Read this blog for more information.
Another way to build a positive credit history is to take out a bad credit loan and make the monthly repayments on time. A credit card can also suffice.
Utilize Low Credit
Credit scoring systems look at your credit utilization rate. A high rate means you’re consuming a lot of credit, which is a bad sign, regardless of whether you’re always paying up the balance. On the other hand, keeping a low rate is good for your credit score.
Let’s say you have two credit cards with a combined limit of $5,000. If you spend $4,500, your utilization rate will be 90 percent. Ideally, you want to keep it at no more than 30 percent. This means spending no more than $1,500 consistently.
You Can Rebuild Credit Fast
In this economy, fewer things are more important than your credit score. But if you’ve got bad credit, you shouldn’t consider it a life sentence. You can rebuild credit fast and enjoy the benefits of having good credit.
Need more credit repair tips? Stay hooked to our blog.