Bad credit can often seem to hang over you like a dark cloud, making all your financial decisions that much more difficult. And, in many cases, you might not even realise your credit rating is in poor health.
It is only by monitoring our credit reports regularly that we can understand what is going on, and work towards fixing any negative items. Not only that, but bad credit is occasionally because of fraudulent or misrepresented claims against your score – which must be disputed at the earliest opportunity.
The good news is bad credit can be fixed with a little time and effort. Having a healthy credit score provides several advantages, not only are you more likely to be approved when lending, but you can borrow more at an improved rate of APR.
Below I will detail steps anyone can take to improve their credit score. If you would like further information, then check out Crediful.
Improving Your Credit Rating
The easiest way to fix your credit score is to use a third party, however this often isn’t an option for everyone; so, I am going to focus on steps that anyone can take, regardless of their current situation. The first thing you need to do is become acquainted with the (FCRA) Fair Credit Reporting Act which outlines your rights when dealing with creditors and debtors.
Next, act on the following steps to make some headway towards removing negative items from your credit score.
1. Obtain a Credit Report
Credit reports can be accessed relatively easily online, through various companies such as Equifax, TransUnion, Money Supermarket, Experian, and many others. Most will provide your credit report for free, while others may charge you for access.
Getting a copy of your credit report is as simple as entering some of your personal details and confirming your identity. You should then have a copy of your credit report, some companies will even mail you a hard copy if requested.
2. Review Your Report
When you have obtained your credit reports, you need to review them carefully to make sure they are accurate. Sometimes it is worth getting more than one credit report as creditors often don’t report to every bureau, and there may be discrepancies.
It can’t be overstated how important this step is, you must make sure that all the information found within your reports is accurate. Start with your personal information, ensuring that it is correct and that no one else has been listed within your reports.
Next, ensure that account data is correct, including opening dates & balances; make notes of anything that doesn’t look right – particularly any late payment indicators or other negative marks.
One cause of bad credit is unknown identity theft, so you must check each line of credit and make sure that it is correctly attributed to you. If you don’t recognise any of them, make a note of it as someone may have lent money fraudulently using your identity.
Check all your currently open and closed lines of credit & make sure to inspect the negative records section thoroughly. The negative records will have the most impact on your credit rating, detailing accounts where the repayment agreement was broken, public records, and collections.
3. Dispute Negative Reports
If your report contains any inaccurate information that is biased, incomplete, misleading, or just questionable in nature, you must dispute it. Any dispute that results in negative actions being removed from your credit report will positively improve your credit health by a considerable margin.
And the thing is, most people don’t realise they can have negative information removed from their credit report. Instead of waiting years for undesirable credit information to drop off, you can have them removed in a matter of days in some cases.
Consolidate Your Debts
One quick win that can help towards repairing your credit is to leverage a personal loan for debt consolidation. It is also possible to get loans specifically targeted for credit card debt consolidation, using the money to pay off your existing debts in favour of a single monthly payment.
Depending on what the provider can offer you, you may even end up lowering your monthly payments, and in some cases, the overall payment. In some cases the amount you pay back may increase, and you need to decide if the benefit to your credit score is financially viable for you.
Open-ended debt, like credit cards, that can keep being added to are looked upon less than favourably by lenders. Whereas instalment debt, debt with an expiration date (your term agreement) is seen in a better light.
Whether you are struggling with debt, or looking to clean up your credit report – it is essential that you do your research first to find the best option for your situation. It is always recommended that you consult a professional, however that isn’t viable for everyone.
There is a wealth of resources available online that you can use to improve your credit rating and get advice.