Get Fresh Credit: How to Fix Your Credit Score
Your credit score is one of the most important identifying factors. When it comes to purchasing a home or a car or even getting insurance, your credit score plays a big role.
Today, more and more people are learning the importance of a good credit score. But for many, that lesson might be a little too late - their credit scores have already taken a hit due to late or missed credit card payments or perhaps a bankruptcy.
Factors that Can Hurt Your Credit Score
Credit scores range from 300 to 850, with the basic following breakdown:
- 730+: Excellent Credit
- 700-729: Good Credit
- 670-699: Fair Credit - the lender will take a closer look at your file.
- 585-669: High-Risk Credit - those with high-risk credit will find they are not eligible for the best rates and products.
- Below 585: Bad Credit - credit options will be significantly limited or not available at all.
The following factors can bring your credit score down:
- Missing a monthly payment can reduce your score by as much as 35 points.
- Filing for bankruptcy can reduce your score by as much as 200 points.
- Maxing out all of your credit cards can reduce your score from 20 to 120 points.
Steps to Improve Your Credit Score
If you are one the many consumers finding that they have poor or high-risk credit, fortunately there are steps you can take to help repair your credit score. It won't happen overnight, but if you are diligent, you can see your credit score gradually creep up.
Here are some of the most-recommended actions you can take to improve your credit score:
Step 1: Pay all of your loan and credit card payments on time. Making loan or credit card payments late, or missing them altogether, can negatively impact your credit score. Therefore, it is important to ensure that you do not miss any due dates when paying your monthly bills.
Step 2: Do not close unused credit cards. Many people trying to fix their bad credit scores might race to grab a pair of scissors and begin cancelling all of their credit cards. However, closing all of your credit card accounts actually can do more harm than good. If you close your oldest accounts, you in essence are shortening the length of your credit history - the longer your credit history, the higher your credit score will be.
Step 3: Strive to pay off your "revolving" debt first. Some debt is worse than other debt. While mortgages and school loans will not negatively impact your credit score, credit card debt, also known as "revolving" debt is viewed in a more negative light than other forms of debt.
Step 4: Do not apply for new credit. When you apply for new credit in the form of a loan or credit card, a credit inquiry appears on your credit report. An individual inquiry could subtract about five points from your overall score, which is not that significant if you already have good credit. However, if you are trying to increase your number, any decrease is a significant decrease.
Step 5: If you need assistance, contact a credit restoration company. Some people find they need professional assistance in maneuvering through the credit bureaus and collection agencies as they try to fix their credit scores. The services of a credit restoration company can help. However, it is important to make sure the company you are considering is legit. There are several rules credit restoration companies must follow under the Credit Repair Organizations Act, such as credit repair corporations can't require you to pay any fee until they have finished the services they promised. More information on how to determine whether or not a credit repair company is legitimate is provided online by the Federal Trade Commission.