You may hesitate to apply for a home or auto loan due to a bad credit history. Past credit problems limit your finance options. But fortunately, there are solutions to credit problems, and there are ways you can raise a low score and qualify for the best finance rates.
Debt Balances
Carrying high balances and constantly opening new accounts can hurt your credit rating because the amount you owe accounts for 30 percent of your FICO credit score. Don't rely on credit cards to acquire possessions. Get into a habit of using cash, and start paying down balances to help solve credit problems and maintain a good rating.
Assess Damage
Get a copy or your credit report to assess the damage to your credit rating. Knowing the information on your report is the first step to repairing a bad credit history. Creditors and lenders frequently send information to the bureaus, and they may report information such as late payments, collections and judgments. Staying on top of your profile and knowing what areas to address can help solve credit issues and improve your bad score. AnnualCreditReport.com provides consumers with free copies of their reports each year.
Credit Rating and Payment History
There is a strong link between a good payment history and a good credit score. Paying your bills on time is essential to maintaining a high score. This is because your payment history makes up 35 percent of your FICO credit rating. Paying bills on time isn't easy for everyone. Some people are short on cash when bills are due, and poor organization can impact timely payments because some forget due dates. Establish a system to contribute to timely payments. Consider mailing payments as soon as the statement comes in the mail, or signing up for online account management and scheduling payments online.
Credit Inquiries
Recognize the potential danger of applying for numerous credit accounts within a short time. Credit applications or inquiries on your credit profile decrease your FICO credit rating. Solving credit issues can be a matter of declining offers for credit and only submitting applications for credit when necessary.
Past Due Accounts
Improving your payment history helps fix bad credit. However, if you have older accounts that are in collection status or judgments on your credit report, getting these items removed involves contacting old creditors to schedule a payment, and then asking your creditor to delete these derogatory remarks after they receive a payment. Paying an old debt doesn't automatically remove the information from your report. Creditors make the decision to keep or remove collection accounts and judgments from your report.
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