What’s your credit score? Does it even matter? Well it depends. Overall, it’s ideal to have a good credit score, but that may not always be the reality. An unplanned event or change in circumstances can chance everything. In the last article, we discussed what factors affected your credit score and what scores were considered good. Now, let’s get into whether your credit score matters and how to repair it.
Let’s get real. Is that ok? So, credit only matters if you need to borrow money or are changing locations. If you are at a point where you are not planning to finance a home, a car, or rent a house you can relax. No need to stress. It would be a good time, however, to save money and improve your credit score because those unplanned events love to pop up.
But what if I am at a point where I want to finance something you may ask. First ask yourself, can it wait? The lower your credit score the more interest you will pay and that adds up quickly. If you can wait at least 3 – 6 months and apply the points below, that can save you hundreds or thousands of dollars in interest. Not to mention, you may find a better deal by taking your time and shopping around. But what if it can’t wait? Just be prepared to pay a bit more upfront, but still diligently apply the points below to improve your credit score. You can refinance about a year after to negotiate better rates and terms.
Now that we have that in order, let’s dive in. How to repair bad credit…
Pull your credit report from all three bureaus at www.annualcreditreport.com.
Check for errors. Sometimes there may be incorrect information on our credit report. If so, contact the credit bureau directly to correct the matter.
Find what account or accounts are doing the most damage and focus on those first. We first have to prioritize what to work on. What caused the decrease in your score?
Get organized. Now that you know what to focus on, prioritize it. Maybe that means adding to reminder to your phone or automating your payments so that you are not late. Or it may mean readjusting your budget to pay higher amounts to a certain account. Note: your credit ratio is based off your statement balances. Even if you pay the balance in full if the statement balance is too high that will affect your credit.
Become an authorized user on a spouse or parent card. Their good history will help you. Or get a Co-Signer.
Contact your creditors. If you’ve already missed several payments and foresee that you are not able to keep up with payments. Contact your creditor. They will be able to enroll you into a payment plan to get you back on track and reduce your monthly payments.
Regaining credit is possible! Taking practical steps can increase your score in just a couple of months with continual improvement over time. While having good credit is wonderful, depending on it should be considered carefully. It’s also wise to save and build additional sources of income. We’ll discuss both in future articles.
Until next time,
Crystal Hicks is an accountant with well over a decade of experience in tax, finance, audit and accounting in New York and Florida. Each week in Money Talks, she’ll share her advice to help individuals to navigate their financial challenges!