Credit Repair: Fixing Your Financial Health

Credit Repair: Fixing Your Financial Health

If you’ve ever had to apply for a loan, finance a purchase, or get a mortgage, you are probably already familiar with a company looking up your credit score. At the end of the day, many people know the term credit score, but they aren’t sure exactly what it means and what it entails.

We are going to spend some time talking about credit scores today and what you can do if you are in bad financial health. Having a bad credit score can severely limit your ability to make major purchases and it will follow you along for the rest of your life unless you undergo credit repair.

Before we talk about how you can undergo credit repair however, we are first going to talk about what your credit score is and where it comes from. From there, we can address how to get your financial health back on track through repairing credit.

What is Your Credit Score

Your credit score is a number between 300-850 that depicts how likely you are to repay your line of credit. The higher your credit score, the more trustworthy you are, therefore the more likely you are to not only get approved for a loan, but get a good loan.

Having a bad credit score will do the exact opposite for you. You are going to struggle to secure loans and mortgages as most places will not trust you to pay them back.

If you do find a place that will approve you, you are likely to face high interest rates and even have to put down collateral to help protect them.

What Lowers Your Credit Score

Your payment history plays the biggest role in determining your credit score. If you have failed to make payments on time, you are going to be tanking your credit score.

The more this happens, the more debt you will accumulate and the lower and lower your score will get.

Credit Score

The amount you owe also plays a major role, albeit not as much as your payment history. If you are constantly maxed out on your limits, it does not look good on your end and your score would then lower as a result.

You want to be carrying some balance so you can prove you can pay off debt, but not too much that it’s always maxed out.

A short credit history can also be a red flag as it shows you are new to credit and borrowing money. If you have just started a line of credit in the past few months for the first time in your life, don’t expect your credit score to be booming.

Finally, applying for new lines of credit will lower your score as well. Opening up new credit without having paid off previous lines of credit is something that companies look down upon. That’s not to say it’s going to ruin your rating, but it can negatively impact you.

How to Repair Your Credit Score

Credit Score

Now that we’ve talked about the things that negatively impact your credit score, it’s now time to talk about credit repair and how you can go about fixing things.

Credit repair is extremely important as it will allow you to get the loans that you need from the bank and other places.

We are going to take you through a step by step process on credit repair so you can not only get an idea of what your score is, but also get an understanding of how you can fix it.

A lot of people undergo a period of poor financial health and the big thing is that you don’t let it dictate the rest of your life.

Review Your Reports

Before you can go about repairing credit, you have to know what your credit is. There are credit bureaus out there such as Equifax that will give you a free copy of your report once a year. There are other pieces of software that you can use to view your credit.

Once you’ve obtained your credit report, you can now determine exactly what is on it and where you’ve gone wrong. You can’t begin to repair credit if you don’t know what has to be repaired.

Dispute Incorrect Information

Believe it or not, there are probably going to be some mistakes in your credit report that are negatively affecting your score. What do they look like?

In most cases you’ll find it as a situation where you paid a company the money you owed them, but they didn’t document it or your insurance claims the payment was made to a company, but in fact it was not.

No matter the situation, you are going to be hit with a negative mark on your credit report. Fortunately, it is easy to repair credit that was negatively affected in this manner.

The first thing you are going to want to do is settle the account and clear things up with the providers.

Credit Score

Once all the money has been paid and everything has been settled, it is now time to dispute the negative mark.

We are mentioning credit repair software here again because we found it was the easiest for disputing things like this. Simply select the negative mark and then click dispute and fill out the correct information from there.

Within a week, the entry should be removed and you are now one step closer to being done with your credit repair.

The same can be done for payments that are marked as late but were actually paid on time. You are going to contact the provider and once again file a dispute in order to continue with your credit repair. Give it a few days and it should be removed from your score.

Carry a Low-Mid Credit Balance

We talked about this earlier and how maxing out your credit constantly is a great way to ruin your score. To undergo credit repair in this area, you are going to want to carry a low-mid balance of credit that you can easily pay off on time. 

In these areas, we see many people argue about keeping your balance at zero, but this isn’t as useful as you might think for credit repair. Carrying a zero dollar balance does not provide any indicators on your ability to take on credit and pay it off. 

Banks and other financial institutions want to see that you can take on a reasonable amount of credit and then pay it off on time. The more you do this, the better your credit score will be. Don’t expect things to change overnight however, as this form of credit repair can take a while to accumulate.

Increase Your Credit

If your credit card is sitting above 50% of your available credit, this is going to negatively impact your credit score, even if you can easily pay things off.

If you are going to constantly be making large purchases that are going to consume a chunk of your credit, we would advise upping your credit limit.

Let’s take a look at an example. If your credit card maxes out at $3000 and you are carrying a balance of $2500, it is going to negatively impact your score, even if you have a large amount of money in your checking account.

In a case like this, if you want to undergo credit repair, it is best advised that you apply to increase the limit. Upping it to something like $7500 now puts you under that 50% threshold and allows you to start repairing credit.

Make Payments On Time

Credit Score

The last thing we are going to talk about is the most obvious when it comes to credit repair and it is simply making your payments on time.

Late payments play the biggest role in ruining your credit score so make your payments on time.

We do understand that this is easier said than done however, as most people who have poor credit often have it because they are unable to make payments on time.

Do your best here to catch up. Credit repair starts with paying off any outstanding debts and making payments on time.

Closing Thoughts

Having a good credit score and good financial health puts you in a position to get the loans that you need for good interest rates. Credit repair is essential if you have a poor credit score for that reason.

Try out a variety of these methods and start working to fix your credit score today. As we mentioned, it does take time for credit repair to take effect, so the sooner you start, the sooner you can repair your financial health.

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