I am sure that most of us, well let’s say 1 in 3 of us have asked: ‘How can I fix my credit?According to stats almost one third of people in the USA have poor credit or bad credit and this number does not represent the percentage of the population that has no credit at all.
Personally I can tell you that in the USA Credit is King. I used to think Cash was King, but since arriving in the USA I can attest to the fact that having no or little credit history and low credit can seriously impact you as a mature adult.
Even with decent money coming in, without a respectable credit score so many opportunities are missed and some large scale purchasers are denied for a low credit score.
I came to appreciate very quickly, that Credit Scores, and good ones at that are a vital component of modern living in the USA.
So, if you are stuck with a low credit score what actions can you take that will positively drive that number up?
Hire someone to Fix your Credit – If you have spare Dollar
So, let’s be upfront here. There is nothing quick about fixing your credit score. If you are looking for a quick fix for credit, well it doesn’t exist.
I asked the same question after my move to the USA. It’s a long term strategic play, doing the right things for long enough that will get that score to head North.
You could hire a firm to fix your credit score, but actually anything that they are doing you could not do yourself for free. It really comes down to time. Do you have the time and motivation to do it yourself ? Do you need to pay someone to do that for you?
I would probably choose the later, only because I have reached the max of making time in the day. Working a normal work day, then working at my wives business, developing a t-shirt brand and having two young kids at home… I mean I am tapped for time, at least I feel that way. So yup I would pay someone to do it, but let it be known that its likely you could do it all on you own for free.
The long Term Play – Let’s Get the Credit on Track
Time to get that Credit rating back on track. So what can the likes of you and me do to kick that process off and what subsequent steps do we need to take in order to ensure a long term upward trend on our Creidit Score
Check your Credit Reports – First Step Forgotten?
So simple most people do not think to start at the beginning and check your credit report. They need to be accurate and checking these at the start can help identify things on your report that may be having an adverse effect on the score.
You can dispute incorrect information on the reports and identify if you are falling prey to Identity theft. I found a few discrepencies on my report when it came to locations lived… I disputed this information and it was removed from the report.
Late Payments and Past Due Bills – Get Them Current
You need to take the time to get organized. Set calendar reminders to alert you of up and coming payments on you cards or accounts. Some advice to get payment in several days before the due date as payments on the due date are sometimes not reflected immediately and you end up being late.
If you have past due bills then you need to try to at least make minimum payments to take your account out of the ‘delinquent status’ to paid status. So try to make that payment.
Doing this will not remove any previous late payments and reporting, but you credit report will not continue to report this status which affects all the positive activity and actions you are doing in parallel for your credit. Having past dues just sabotages all your efforts, so it needs to be fixed up quick sticks.
There is no Replacement for Time in the Game
This is one that I suffered with, being new to the USA having no credit history and basically very young history there was little that I could do but look at my young low score. Credit history age is another factor that effects your score and there really is not much you can do outside of hitting the fast-forward in a time machine.
I lied though, you can do something that can positively impact your score. If you have a person who has a good score and a lengthy credit tenure with on-time payments you could ask to be an authorized signer on the Credit card or cards they may have. It is a hanging on the coat tails method. If you have a friend or family willing to do that then this should see you score improve.
Generally speaking the Credit Bureaus see a good Credit history around 4-5 years long and will initially only start reporting on you after 3-6 months.
Secure Credit Cards – A Great Way to Get Good Credit
What are these you ask..well you essentially you make a deposit against a card n order to obtain a line of credit on that card.
If you miss making payments on the secured credit card, then your deposit will be used to cover the outstanding balance on the card. A long as you make timely payments then these are great vehicles to get your score moving in the right direction.
Credit Card Usage – Stay In Control
This is another well-known fact well-known point when it comes to revolving credit. You need to keep your credit card utilization below 30%
If the total usage across all your credit cards is below 30% ( the aggregate statement amount) then you are in the sweet spot. You need to be cognizant of this Credit and Utilization ratio and keep it below the 30%. Even if you have perfect on time payments, a ratio above 30 % can negatively impact your score.
Take out additional cards to increase your debt allowance or ask for a credit card increase on your existing card, if you are consistently using the card more the 30%. S increase is credit limit will bring the bring your ratio closer to the 30% sweet spot.
QuickFire Action Plan and Guide – A Short Read
For those of you that need a super concise rule book on actions items and activity that can impact on your score.
- Pay your bills on time.
- Get current with missed payments and stay current with your payments.
- Paying off a collection account will not remove it from your credit report ( It stays reported for 7 years)
- Still not able to cover all your expenses ? look at getting a legit Counselor for Credit education.
- Keep balances under 30% on revolving credit ( Credit Cards).
- Closing accounts is not great long term strategy for improving credit scores and often still counts in determining your score.
- If you have young credit do not open to many credit cards to quickly.
- Checking you own credit report will not affect your score.
The Short of it is…
There no ‘Magic Pill’ to take for fixing Credit , no quick fixes , but rather long term consistent actions that will make a difference to that all important score. We all know that it may not be as easy to implement as is written. You need to have money to start making changes and if after careful analysis you need prfessional help then take steps to get it.
Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution