Correcting Low Credit Scores For Dummies

Individuals who have low credit scores often have trouble getting credit cards and loans. This can make it difficult to purchase a home or car, making it important to work towards correcting this problem as quickly as possible.

The first step to improving low credit scores is to make sure the contents of your report are correct in the first place, which you can do at annualcreditreport.com. In the age of identity theft, it is always possible someone has fraudulently run up charges on your accounts. To do this, you need to order your credit reports and examine them. If you find any such charges, dispute them immediately. Remember, you’re entitled to receive a credit report from each of three credit-reporting agencies once a year, free of charge.  Note:  this unfortunately doesn’t include access to your actual Fico credit score.  I recommend purchasing your Fico Scores/Reports directly from the source at myFico.com if that is what you want.

Improving Low Credit Scores 101

If your credit score is still lower than desired after fixing any improper charges against your accounts, the most important thing you can do is prioritize what needs to be paid the most. For example, if any company has hired a collection agency to contact you, it is important to begin to settle these issues. Instead of avoiding their calls, contact them and negotiate terms for you to pay off what you owe. Because they’d rather get something than nothing, most of these agencies will be willing to work with you.

After you’ve negotiated the terms of any past due accounts, you need to separate your debt mentally into two piles; “good debt” and bad debt. “Good debt” includes student loans, mortgage debt, and the like. Paying these bills on time helps to increase your credit score. This isn’t to say you should intentionally carry debt merely to prop up your credit score, of course.  After all, if you don’t need to borrow money, your credit score is meaningless anyway.

Bad debt is the debt you need to worry about if you desire to fix a bad credit ranking. Aside from past due accounts, bad debt can be as simple as having large balances on several high interest credit cards. These are the accounts you should consider trying to pay off faster. One popular method is to select the card with the highest interest rate and concentrate on paying as much as possible on this card, while still making the minimum payments on the rest of your credit accounts.

These tips should help you fix a negative credit rating and make it easier to secure loans in the future.