Your credit score is important for a number of reasons. It can determine whether or not you get approved for new loans, credit cards, or even a job or an apartment. What happens if you have a bad credit score? Fixing it can take time, but it’s not impossible. As a non profit credit counseling agency, ACCC explains how to fix a bad credit score:
Take it from our credit counselors – there are ways to fix a bad credit score.
What is a bad credit score?
First, let’s discuss what is generally considered a “bad” credit score. FICO scores range from 300 to 850. A credit score of 800 or higher is considered excellent. A 700 or higher is usually considered good. A 650 is considered fair, and anything lower is generally considered poor. If your score is lower than 650, you may not be able to get good interest rates on new loans, if you are even approved at all. You should probably spend a few months building up your credit score before applying for a new car loan, for example. So, what do you do next?
How to Improve Your Credit Score
Improving your credit score takes time. It will likely take a few months of good habits to get your score up. The most important step you can take is paying your bills on time and in full if possible every month. Payment history accounts for 35 percent of your total score. Another step to take is to lower your credit utilization if it’s too high. Ideally, you should keep your credit utilization rate below 30 percent. This means if you have $1,000 in available credit, you should not charge more than $300 to your credit card. Paying off debt you already have can help too.
You should also hold off on applying for new credit cards, because every time you apply, it results on a hard inquiry on your credit report. Too many hard inquiries is bad for your credit score. Don’t close any accounts though, especially not your oldest accounts. Length of credit history is also an important factor in determining your score.
Besides the traditional ways to increase your credit score, you can also try a new method. Experian Boost is a way to get cell phone, internet, cable and utility payments added to your credit report. Normally, these are not included, so any positive payment history with these expenses has no impact on your credit score. With Experian Boost, however, these can count towards your score.
Beware of Credit Repair Scams
Be careful of any companies that claim they can remove information from your credit report. No one can legally remove accurate and timely information from your credit report. If any company claims they can do that for you, don’t give them your money! Anything that sounds too good to be true, probably is. There’s no such thing as a quick fix for credit problems, but as long as you put in the time and effort, you’ll get your credit score back up in a few months!
If you struggle to pay off debt, ACCC can help. Sign up for a free credit counseling session today.
