You may be one of the many Americans today dealing with the everlasting struggle of building your credit back up from unfortunate mishaps or historical mistakes. Don’t worry, you are not alone. Credit is one of the few things, along with taxes, that is the least taught yet the most impactful subject in everyday life. Housing, cars, business, and now even jobs require good credit to obtain, and has left many people thinking, “how can I fix my credit?”. Let’s explore what to do if your credit scores are low.
Recap of the Credit System
As mentioned in our Benefits of Good Credit article, credit is simply a system put into play in order to show how well an individual is at paying the money back that was accredited over a long period of time. This information is represented on an individual’s credit report across 3 separate nationwide bureaus, TransUnion, Equifax, and Experian. The accredited money comes in the form of loans, credit cards, or services and is given to individuals by creditors.
Creditors, or credit grantors, are banks, financial institutions, and even lending institutions that give individuals lines of credit based on their current credit scores and reports. These creditors are extended over to an individual and then have the payment history of the line of credit reported to the 3 nationwide bureaus. On-time payments are reported as beneficial to your credit report, while late/missed payments hurt your report.
Know What is On your Credit
Before making any rash decisions with your credit, or taking the advice of everybody on the internet, it is important to know what exactly is affecting your credit. The most recommended option is to enroll in a credit monitoring service, such as SmartCredit, in order to access your reports from all 3 bureaus. It is also recommended to select a plan that will refresh your credit report every 30 days so you can receive an updated report while you begin working on repairing your credit.
Once you have a copy of your credit reports, begin analyzing them and looking for anything reported as delinquent or derogatory. You can refer to our upcoming article structured on how to read a credit report coming soon. After analyzing, understand which accounts are the ones giving your report the problems. Compile a list of each account, any outstanding balance, and the current status of the account is in.
You have now gathered the information on your credit report and hopefully have a better understanding of why your scores may be being harmed. But what if your scores are low and your report doesn’t show any really negative items? There are some reasons why your score may be low other than negative items.
What to Do if your Score is Low
So there are plenty of reasons why your score may be low. If you analyzed your credit report and noticed delinquent and derogatory accounts, that will be a major factor if your score is low. Any derogatory item on your report affects your credit due to the status the account is in, not necessarily the debt associated with the account. Accounts become delinquent when late payments are reflected on your report, and you can always explore the option of asking for late payment forgiveness which is detailed in an upcoming article.
If your scores are low, and you dissected your report and see minimal issues in regards to accounts in relation to late payments or derogatory items, you may have another common problem.
- Lack of Credit History
- High Credit Card Utilization
Lack of credit history is definitely a contributing factor to why your score may be low. Remember, credit is designed to show how well an individual is at paying back borrowed money over a long period of time. Meaning, that if your accounts are relatively new, you will not have enough credit history to showcase a strong credit score. Over time, your scores will naturally increase as it does highlight the fact that you can obtain a line of credit and continue to keep making on-time payments to ensure the longevity of the line of credit extended over to you.
High credit card utilization is the most common reason why your scores can be seen as low. It isn’t common knowledge, but your credit card utilization equates to over 35% of your credit score across the different scoring modest (FICO and Vantage). Your credit card utilization is the ratio of your current balance to the limit given to you by the creditor. The major bureaus deem a credit card utilization of 30% or more is seen as a risk and will naturally bring your scores down. The trick to maintaining your credit card utilization is maintaining a low balance in comparison to your limit and keeping it as low as possible every month.
What to Do with Delinquent Accounts and Derogatory Marks
Delinquent accounts and derogatory marks are the most common and the most egregious marks to have on your report. There are some options that can be considered if you see you have some of these items on your reports.
- Late/Missed Payments
- Excessive Hard Inquiries
- Charged-Off Accounts
- Collection Accounts
- Medical Bills
- Repossessions
- Bankruptcies
- Public Records
- Child Support
The most common accounts to run across are late payments and collection accounts. Late payments are pretty self-explanatory, you pay late, and that history will be documented and reported. When you accumulate enough late payments, they will be seen as late payments and can be escalated to a derogatory charge-off.
Charge-offs are a status placed on an account once enough late payments have been accumulated and the creditor deems that they will never be able to obtain the outstanding balance. Once an account is charged-off, the likelihood of the account being sent to a collection agency becomes higher and higher every month.
Collections are one of the most common items found on credit reports. Collections can be frustrating to deal with since they are known to be harassing, and send endless phone calls and emails. A cool trick to keep collection agencies from constantly calling, try picking up the phone and stating “I am currently at work right now, anything you need to tell me, please send it to me in writing. Thank you!”. It is important to note that you should never mention your name or acknowledge the debt. They will call you from a recorded line so it is important to stay sharp as anything you say can be used against you to satisfy the debt.
These kinds of items are relatively difficult to get removed or corrected from your report. If you are looking to explore the option of repairing your credit yourself, research, time, and persistence will be required. Now that you understand your accounts, begin researching effective dispute letters that will provide results for the accounts you are currently dealing with. It is important to note, that repairing your credit does take time and snail mail is definitely the most effective way to get results in comparison to sending digital disputes. But what if you don’t have the time, resources, or extensive knowledge on how to do so, you should definitely explore the option of hiring a credible credit repair company.
Repairing your Credit
Starting the journey of repairing your credit can be an extremely stressful one. With severe derogatory marks and delinquent items, the amount of work associated with these accounts can be extremely daunting it is recommended to consider hiring a full-service credit repair company to dispute these items for you.
Here at Credit Supreme, we offer a unique credit repair service, unmatched in today’s industry. We dispute every negatively impacting item on your credit report within the first 24 hours of your enrollment, to provide you results as quickly as possible. We also provide each and every one of our clients with a dedicated specialist whose goal is to teach you about your credit, guide you along the credit repair process, and more importantly help strategize a plan of action to adhere to. Not to mention that each of our clients is backed by a 90-day money-back guarantee, meaning by the third round of dispute results, if we are unable to provide a significant deletion, we will refund your monthly payments.
Conclusion
Credit is a difficult and sometimes frustrating subject. When your credit is good, it becomes your best friend, and when your credit is bad, it becomes your worst enemy. Luckily, there are solutions to fixing bad credit. You can explore the option of disputing accounts yourself or hiring a professional credit repair company to help you do the work for you. Understand why your credit score is low first and analyze the items currently affecting your credit and whether or not you need to outsource additional help. Over 70% of credit reports today have inaccuracies, and under the FCRA, all items reporting on a credit report must be 100% accurate and verifiable to be showcased on a report. There are solutions to these problems and Credit Supreme will be more than happy to help you achieve that solution. Your goals are our goals, and we strive to equip you with the knowledge and resources to live your best life.