Steps to Improving a Bad Credit Score


A bad credit score can prevent you from receiving an automobile loan, a credit card with a low interest rate, and it can even make landlords weary of renting to you. A bad credit score is a red flag to creditors and other organizations, so it is critical to improve a bad credit score. There are several steps that you can take to improve a bad credit score, but most of the steps will take some time. Once you rebuild your credit score, you will want to carefully monitor your credit score so that you do not have to start over.

Check for Errors

The quickest and easiest thing that you can do to improve a bad credit score is to check your credit report for inaccuracies. Some common inaccuracies include old bankruptcies, debts that were disposed of during bankruptcy, outdated judgments and lawsuits, inaccurate tax liens, single debts reported multiple times, outdated demerits, spouse’s debts, old hard inquiries, unauthorized hard inquiries, unauthorized accounts and even other people’s account information. Report any inaccuracies to the three major credit bureaus by writing letters and including any supporting documents.

Work on Debt

Another fast way to clean up a bad credit score is to reduce your debt. Your credit utilization, the ratio of credit used to total available credit, accounts for 30 percent of your total credit score. A credit utilization of below 30 percent is ideal, so start paying off your debts so that you can get below that threshold.

Don’t Close Old Accounts

You may be tempted to close old credit accounts if you are tackling your bad credit score, but this may actually lower your credit score. The average length of your credit history accounts for 15 percent of your credit score, so you want to keep this number high. By closing an old account, you will lower the average length of your credit score. Try to keep your older accounts open even if you are not using them. However, you may want to close an old account if you are paying a yearly fee that could otherwise go toward paying off your debt.

Watch Your Hard Inquiries

Since 10 percent of your credit score comes from hard inquiries, you will want to avoid applying for any new credit cards while you are giving your bad credit score a makeover. The fewer hard inquiries that you have on your account, the better, and you should keep in mind that hard inquiries typically stay on your credit report for two years. If you cannot avoid applying for a mortgage or a loan and you are planning to shop around for the best deal, you should apply for these within a short period of time. Your credit score may not be negatively affected if you apply for mortgages or loans in clusters because the credit bureaus understand that you are shopping around to consider all of your options.

Pay on Time!

We have saved the best advice for last. An astounding 35 percent of your credit score comes from your payment history. Just one late or missed payment can noticeably decrease your credit score. A late or missed payment can stay on your account for a long time, so you want to pay close attention to your bills’ due dates. If you are unable to make a full payment on a bill, contact the creditor to try to negotiate a deal that will keep the creditor from charging you late fees and from reporting the late or missed payment to the major credit bureaus.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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