For many people with bad credit, it seems impossible to find ways to get credit scores up. Getting out of debt, cleaning up credit reports are not really difficult if you know where to start. And there are millions of consumers who have been able to successfully find ways to get their credit scores up by following a simple credit repair plan.
If you are determined to make improvements to your score, start by following these five easy steps:
Five important ways to get credit scores up
1. Develop a financial plan:
Credit improvement begins with a working budget. Financial mismanagement, in most cases, is what causes most credit-related problems. The best way to make sure you improve your situation is to make sure you have control over your money.
Cutting out unnecessary spending will provide you with more expendable cash to make sure your bills are covered and will help you later in the repair process. This step is extremely important if you wish to restore your credit successfully. This is where you can’t afford to be lazy. It will cost you more in the long run if you try to dance around this issue, and I know you’re tired of going around in circles here.
A financial plan includes not only getting yourself on a budget but also spending your money strategically. This has to do with borrowing only a certain amount of money and paying it back to develop healthy spending patterns for the credit bureaus to see. And they are watching my friend! For every debt you owe, your credit reporting agency monitors not just whether you pay on your debt, but the manner in which you do so.
Personal Story:
When I embarked on the journey of rebuilding my credit, I had a long conversation with my mortgage lender. He said to me “Jaron, your credit score is this close to being qualified for a loan. You just need to get your score up a few more points”. When I asked him what I should do, he advised me to get a secured credit card. “But,” he said, “make sure you don’t spend more than 30% of your total credit limit”. When I asked why he said, “this will reflect negatively on your credit report if you consistently spend more than 30% of what you have available on your card”.
So, I took his advice, got a secured credit card. While talking to the representative over the phone, she said something very coincidental. She said,”And by the way, once you get your card, make sure not to spend more than 30% or your overall credit limit: Do you think I got the message loud and clear after that confirmation? And after a few months guess what? My score went up, and went up significantly. This is just one of the many things I did to raise my score.
You see, once you understand that the credit bureaus operate off of an algorithm, you realize that all you have to do is work with that system. It’s just a program used to take all of the data on your report, and generate a score based on patterns. So understand the system, and work it to your advantage. As I said before, this was just a small part of a financial plan I was working to increase my score. I provide a full resource guide for free at the bottom of this post for you to use as well.
2. Make adjustments to your credit report: Not only are you entitled to have any inaccurate or incomplete information on your report corrected, but you are also allowed to have adjustments made to old or outdated negative information. Most people don’t realize that inaccuracies on your credit report bring your score down. And please don’t think this is limited to just collection agencies. There are over 30 categories on your credit report, and if any of them are inaccurate, it can bring your score down. This doesn’t sound fair because it’s not. However, it is very true. I did a video lesson on this that you can watch here.
The statute of limitations determines how long negative information can remain on your report. If you need corrections made to your report, you can accomplish this by sending a dispute letter to the reporting agency.
Making corrections to your report is an important way to get your credit score up and is part of the repair process because having an accurate report gives you a fresh starting point so that you can focus on your other credit problems. This is one of the most important ways to get credit scores up.
3. Settle your debts:
Getting out from beneath all that debt can seem impossible. Many people don’t realize, however, that most collection agencies and some creditors are often willing to settle your debts for an amount you can afford. Let’s get an important question answered for you here. Will my credit score go down if I settle my open collections? The answer to this question is a resounding No. Here is where people get confused because there is a two-fold effect to settling debts for lower than what is actually owed.
When you have an open collection on your account, its just like having a scar on your credit report that begins to bleed (financially speaking). As long as that collection account is open, your score will continue to go down, However, once you get the account closed, it stops the bleeding. This does not necessarily make your score go up, but it does keep it from going back down. In essence, it stabilizes your score. Once those accounts are closed, its the positive lines of credit that make your score go up.
Where a lot of folks miss it is in the fact that they have positive lines of credit, along with open collections on their account. So the collections are simultaneously undoing all the good, that your positive lines of credit are bringing to your credit report. The idea here is to stop the bleeding first, then add good credit patterns to your report. With that in mind, feel free to settle as many open accounts as you can, especially if you have a lot of them. Pay as little as you can to close them out to stop the bleeding.
Now the second part to keep in mind here is the way that lenders will view your credit history. If a lender sees that you settled on an open account, it could leave a bad taste in their mouth. So if you can pay off the amount in total, do so. All I’m advising is that if you have a host of open accounts that you can’t afford to pay off in full, there’s no problem in settling here. Not all lenders will frown on this, as they know how the game is played, and that you were choosing to stop the bleeding on your report. What matters most for them will be the positive lines of credit that you have bee faithfully making payments on going forward.
In fact, it’s possible to have your debts reduced by as much as 60%. With those kinds of savings, getting out of debt can be much easier than you thought. Unpaid debts are extremely damaging to your score. Paying them off will make a significant improvement.
4. Establish new credit:
If you’ve gotten this far in the repair process, chances are you’ve already noticed a considerable difference in your credit score. Now, let’s make even more progress by establishing new lines of credit.
Once you’ve applied these tips to your credit history, you’ll get approved for new lines of credit. That’s because lenders will notice that you’ve cleaned up your report, paid down your debts and are ready for new responsibilities. Establishing new credit is one of the best ways to improve credit scores even more.
As I mentioned, a credit card (secured or non-secured) will help to establish new lines of credit for you. Think of it like having a brand new start to prove to lenders that you’re a faithful borrower. And it doesn’t have to be for large credit limits either. You can do small things, like buy a new set of tires and prepay on a secured card from the tire company. Then when you buy your new tires, simply replenish the credit limit on the card, which is simply paying yourself back. This gets reported to your credit bureaus as a faithful payment pattern and will cause your score to go up.
5. Managing your credit: By this time you’ve learned a lot about financial responsibility and credit management. Now it’s time to put that knowledge to good use. After you’ve established new credit, it’s very important that you manage it appropriately. Basically what this means is, watch what you do going forward. With every financial decision you make, keep your credit score in the back of your mind. You don’t want to get sloppy once you’re on a good path to repair. Monitor your credit health constantly.
Check your reports to ensure that no mistakes have been made. Maintain healthy payment patterns, and don’t be afraid to take on new lines of credit as you pay off older ones. Try also to always have a healthy debt to credit ratio. This means that a lender can look at your report, and see that you have more income coming in than debt that you owe. Remember to check for anything that looks suspicious on your report as well. You can even get help from an expert to monitor the patterns on your report for you, and give you advice. Also, when seeking help, always remember that you are protected by the Credit Repair Organizations Act.
Paying your bills on time each month is a good start. Hang on to those new lines of credit. Keep them active for as long as possible. In time, you’ll see your score rank in with the best.
As you can see, there are many ways to get credit scores up and these are just a few of them. Below is a free guide that will go over the many aspects of credit repair that most people don’t think about. It will also cover:
- Getting and Understanding your credit reports & scores
- Real “how-to” for improving your credit (these are the very tactics the best credit repair firms in the country use)
- Powerful action plans
To Better Credit!