Approximately 30 percent of Americans currently have a "bad" or "poor" credit score. Are you part of this group?
If so, you're definitely not alone.
Many people are dealing with a bad credit score and are actively trying to fix the problem, but plenty of others don't even realize their credit score is not where it ought to be.
If you're unsure of whether your credit score is a good or bad one, or if you just need help figuring out how to boost your credit, keep reading.
Explained below is more information on what constitutes a bad credit score and what you can do to turn your score around.
How Do You Know if You Have a Bad Credit Score?
Before you start trying to create a plan to improve your credit score, it's important to understand what your current credit score is and which category it falls into.
Most credit scoring models are based on a scale of 300 to 850. The lower your score, the worse your credit.
Most models also use the following ranges to determine the condition of one's credit:
- 750-850: Excellent
- 700-749: Good
- 650-699: Fair
- 600-649: Poor
- Below 600: Bad
If you have a poor or bad credit score, you'll likely have a harder time getting approved for loans and credit cards. If you do get approved, you'll likely have to pay higher interest rates and accept loans for smaller amounts.
A bad credit score can also influence other aspects of your life, such as your ability to find a job.
Factors that Influence Your Credit Score
How do you end up with a bad credit score? There are many factors that affect your credit score, including these:
- Payment history (whether you've paid your bills on time or not)
- Credit utilization (the amount of money you charge each month relative to the credit you have available)
- Length of credit history (how you've had open credit accounts)
- New credit (the number of new credit accounts you've opened in a period of time)
- Credit mix (the types of credit accounts you have open -- loans, credit cards, lines of credit, etc.)
Of all these factors, payment history and credit utilization hold the most weight.
The others are important, too, but addressing your ability to pay bills on time and the amount of money you're charging each month will have the biggest impact on your overall credit score.
How to Repair a Bad Credit Score
Okay, now that you know where your credit score falls on the typical credit scoring model and what kinds of behaviors might have brought you to this point, it's time to focus on what you can do to fix it.
There are a lot of steps you can take to improve your credit score, including the following:
Pay Your Bills on Time
One of the best things you can do to start boosting your credit score is to pay your credit card bills and loan payments on time each month.
If you have a hard time remembering when your bills are due, write them down on your calendar or set up automatic payments. Remember, even having payments that are just a few days late can have a big impact on your credit score.
Keep in mind, too, that the sooner you get current on your bills, the better. The longer you go with paying your bills on time, the less the past late payments will count.
Even if you can only pay the minimum payment at the moment, make sure you're paying it on time each month.
Keep Your Balance Low
Avoid charging more to your credit cards than you know you can pay off each month.
If you have a large credit balance right now, try to stop using your cards. Take them out of your wallet and store them in a drawer until you bring down or pay off your balance altogether.
Forty-seven percent of Americans carry a balance on their credit cards each month. A lot of people assume this is a good thing, but that's definitely not the case.
If you have the ability to pay off your credit card balance in full each month, do so. This helps to keep your credit utilization ratio low and improves your credit score.
Don’t Open Too Many New Accounts
Avoid applying for too many credit cards or loans at one time, too.
This might seem like a good idea, especially if you're trying to boost the amount of credit available to you. The truth, though, is that applying for too many new accounts can backfire.
If you apply for a lot of new accounts at once, this is a red flag for credit bureaus. They may see it as an act of desperation and a sign that you are lacking cash and cannot pay your debts.
Only apply for new accounts as you need them.
Hire a Credit Repair Agency
There are plenty of things you can do on your own to improve your credit score. Sometimes, though, it helps to have a professional on your side.
Lots of people have success stories of working with a credit repair agency.
A credit repair professional can help you to raise your credit score faster. They can also make it easier for you to pinpoint exactly what issues are bringing your credit score down.
Instead of trying to guess at the best approach to the problem, the credit repair professional will be able to give you a customized, step-by-step plan that will help you bring your score up to where you need it to be much sooner.
Start Repairing Your Credit Score Today
As you can see, there are a lot of different ways you can go about repairing a bad credit score.
If your credit score is lower than you'd like it to be, give these tips a try to start paying off your debts and raising your score.
If you're interested in working with a credit repair agency, we can help at Pinnacle Credit Management.
We are the only credit repair agency that uses artificial intelligence to analyze our customers' situations and create customized plans for improving their scores.
Contact us today to schedule a free consultation.