Our credit scores have become mythical creatures that determine how people measure their financial success and self-worth.
In truth, a credit score is just a measure of how good you might be at paying back debt, based off of past behavior. It has many implications and uses in today’s world, and can be used to determine how much you pay for services like insurance and apartment rentals.
But, what do you do when you have a poor credit score? As someone who has gone from a score in the low 600’s to now over 800, I am your man when it comes to boosting your credit score.
How to Fix Your Credit Score – Quick Links
How to Boost Your Credit Score 100 points or More
Fixing your credit means that you have to prove to creditors you are worthy of being lent money. While I highly recommend living a debt free lifestyle, statisticians have found people with high credit scores are also more likely to be responsible people.
This means that more and more services where you pay after you receive the service are starting to require credit checks and basing your rates for service off your score. While I am not a fan of this practice we frequently have to adjust to the world we live in not the one we wish we had.
Get Your Credit Report
If you don’t know what your credit report is or where to read it, you’re not alone. Perhaps you imagine yourself digging through a dusty government filing cabinet, looking for a file with your name. Fortunately, our credit reports is kept by private companies and have been digitized for years now, and you can check for free at annualcreditreport.com.
With annual credit report you can order all three of your credit reports for free once a year. While we are fixing our credit, you will want to get all three at one time. Once your credit report resembles a Monet instead of a stick figure drawing, you can pull one credit report every three months to make sure no bad stuff pops up and hurts your score in the future.
Dispute Credit Record Errors
Sometimes when a person pulls their credit report for the first time there will be errors on the report. You will want to dispute these records all at one time with all the credit bureaus. These credit errors can do big damage to your score and I rarely find errors to be in your favor.
The good news is that annualcreditreport.com makes it easy to make these disputes directly with each credit burea.
Fix the Negative Credit Records
This is where we get to the hard part. Pulling your credit report is pretty easy. Once you have that report in hand, you have to scour the records to see where the negative items are and figure out how to fix them.
If you are starting to doze off just thinking about doing this, then I recommend signing up for a free credit service like CreditSesame.com. Credit Sesame will pull your credit report for you and translate it into easy to read sections. They even make recommendations on boosting your credit score.
Now that you have what is causing your score to tank, start paying off those debts that are delinquent or in default. If you have debts that are in default and too large for you to pay off, you can go to the company and offer to settle the debt. You have to make sure that you receive a letter from the creditor and keep a receipt for the payment. NEVER give them access to your checking account. Tell them ou can mail them a certified check and NOTHING else. With a letter in hand and the receipt from your certified check in hand you can fight them if they try something sneaky in the future.
Start New Habits
If you are like me and most other low credit score people, your credit score didn’t go in the tank overnight and for no reason at all. It got there either through a combination of bad habits and mismanagement.
This process should be a turning point in your financial success. Start with putting together a budget, start paying all your bills on time, and your credit score will be on the rise before you know it.
For me the turning point was getting married and my detail oriented and extraordinarily hot wife taking over the day to day finances. After we celebrated our first wedding anniversary, I told her she paid for her engagement ring with how many late fees that had been avoided.
If you are not sure where to start on this, the study from I Was Broke. Now I’m Not. Is an affordable and easy to understand way to get your finances in order and change all your bad habits into good ones.
Get a Secured Credit Card (maybe two)
Once you have your report straightened out and have changed the habits that got your score somewhere close to the Mendoza line it is now time to jump start your score building.
If your score is still very low, then the best way to start is to get a secured credit card. You will have to put down around $500 to open each card and then you will want to spend no more than $100 on a card each month and then pay it off.
By doing this you will get all your payments reported to the credit agencies and you will start proving you can handle credit effectively. Most of these cards can convert to a non-secured card after a year or two. By not using more than 30% of your available credit your score go up much faster.
The only reason to have two card is if you do not have two sources reporting to the credit bureaus. So if you have a landlord that will report, you only need one revolving line to charge up your credit score climb.
The last and a key step in getting your credit score to a much happier place is to keep going. Giving up in the middle of this process because it is too hard or because you don’t understand will not change your situation.
If you don’t feel like this process is going fast enough, just remember, you didn’t get a poor credit score overnight and you are not going to fix it overnight. Just like Dori in Finding Nemo you have to “just keep swimming”.
Get Outside Help
Maybe you’ve read through this and it all feels overwhelming or the time it will take to get this thing into high gear is just not feasible with your current situation. It might be time to look at a credit repair service.
The legit credit repair services will do most of the legwork for you and help you turn your credit around. They will follow up with all errors and help you get them erased.
Each companies do charge a fee, but if you want the erroneous stuff cleaned up fast they are the quickest method for getting it done. Some of the best companies are:
- Lexington Law
- Credit Pyramid
- Blue Sky
Fixing Your Credit Score
My wife and I recently bought a new home and our realtor told us, “you have the highest credit scores of any couple I have ever seen.” That vote of confidence is a far cry from the couple who had to get my dad to cosign for the loan we took out to buy our first car. It took us less than two years to go from me with bad credit and my wife with no credit to credit score champions.
This journey included about $16,000 of debt paid off and a long period of time before we felt confident that credit cards were something we could be responsible with. While I may not be where you are right now, I can tell you I have been there. The good news is that my family climbed out of the poor credit hole and you can too.