Some wounds are difficult to mend, but running into the trouble of a bad credit score is something that many would find hard to overcome. No there is no instant solution as such. The thing is that, nothing is impossible and wounds too need time and patience to heal. So does bad credit history, which apparently does not have any quick fix solution. But it does affect one financially and when that happens, what are the things one should be careful about the most?
Things That Can Happen To A Borrower When You Hit Bad Credit Score…
Denial of Credit
People with bad credit history are generally considered to be high risk borrowers. Lenders would hence hesitate to get down to business with you.
Expensive Credit Approval
Or chances are that you would be approved for a higher credit rate. That means, your monthly fees would turn out to be more expensive than before. This type of loans are called ‘sub-prime’ loans.
Poor credit history is a subject that many generally shy away from discussing about. However, keeping oneself at bay would not fetch you any solutions as such. The best thing you can do is find out the smartest way to tackle the problem and find out ways to rebuild your credit score once again. The process might be slow but then it’s quite effective.
The 5 Steps To Effectively Clean Up Your Bad Credit Score Mess
#1 - Scrutinizing Your Credit Reports
The first step to begin cleaning around your mess is by checking it from ground zero and that means from the beginning. This will tell you where you could have gone wrong and what your next step should be. Experian, Equifax and TransUnion are the three credit reporting companies known nationwide that can issue a free copy of the credit report once in a year. The federal law entitles borrowers to approach company for a copy of the annual credit report. Once you get hold of it, read your copy carefully to detect any error. In case you find any error and it can even be an insignificant thing like the spelling of your name or address, report it to the credit agency. This will help you fix your credit score to some extent and the agency would not charge you anything for this. By Law, any negative notation related to bankruptcy or lien can be removed from the credit history report after a period of seven to ten years.
Credit scores generally tend to vary. The commonly used scores are from VantageScore and FICO, according to which a credit score can vary between 300 to 850. A FICO score that is above 720 and a VantageScore of 661 are most likely considered as the best rate. Besides, lenders and institutions must present proper grounds for denying you a credit. That means, borrowers are liable for a free copy of the credit score, based on which the lender had decided not to grant him a credit in the first place.
#2 - Figuring out the problem and fixing it
Figuring out the core problems can be an eye opener for you. Borrowers sometimes do not pay much attention to the total due amount. A credit report can help borrowers keep on track so that they do not miss out on their due dates. Besides, compiling a list of information such as the balance amount, minimum payment and annual percentage rates could bring you face to face with the cold reality. This would however enable you to keep check on your expenditures and mend your credit score.
#3 - Improving Your Credit Score
Making payments on time can help you improve your credit score. The simplest way is by making timely payments. About 35% of your FICO score is generally determined based on how early you pay your dues. The creditor may even remove a bad credit score if you have made a late payment only once. Other than this, the other option is paying off your debts with the help of car title loans. Title loans are short term loans that anyone can borrow irrespective of what your credit history says. That means, those with bad credit history can also apply for one. You can contact a reliable car title loan lender offline or online for a quick cash and have it within 24 hours from the time of application. What’s best is that some title loans come with a credit line facility. In a line of credit, a borrower does not need to draw the entire loan amount at once. One can take out only the amount that he/she requires and use the rest later. The borrower can pay the interest only for the amount that he had drawn and not on the entire loan amount. Now this is unlike the traditional loan where a borrower has to pay the interest on the total loan amount irrespective of whether he/she uses it full. However, using the credit sparingly can help improve your score history. One of the most important factors that make up the credit score is the utilization ratio. This is the percentage rate of the total credit line that is being used per month compared to the total credit line. So make sure not to draw a credit line that exceeds more than twenty percent.
If you have built up some emergency funds then you can resort to it at times like this. Besides, keeping as little as $500 in your savings account can help run your credit card balance.
#4 - Protecting The Existing Account
An existing account might help to boost your credit score. The older the age of your account, the better. Keep them active by making short purchases with your card and then paying the due amount quickly. But avoid the urge to apply for a new credit or even for cash advances since these can affect your score background.
#5 - Diversify Your Monetary Options
Do not depend on one option. Once you have managed your credit score properly, think of ways to diversify your options. Some of the best ways that you can resort to is searching for miscellaneous jobs for earning quick bucks or approaching a lender for title loans or line of credit. Having said that, do not open multiple lines of credit simultaneously. This is because, each application will create a new credit inquiry on the credit file and this can leave a negative impact on one’s credit score.
There is no denying the fact that rebuilding a credit score is a long-term process and can sometimes go back to as far as seven years to make some improvement on one’s credit score. However, this can help one in the long run for time is a great healer. Follow the above mentioned suggested steps and let not bad credit score hold you back from achieving your big dreams.
Contributed by: Autopawn.com