There are a lot of ways to do damage to your credit score. From running up debt in college to losing your job in an economic downturn and not being able to pay your bills to finding yourself underinsured after a medical emergency. Luckily, there are also ways to fix your credit score. So if you’ve found yourself in a bad situation, left with the question “How can I fix my credit score now?” you’ve come to the right place.
Before you can answer the question “How can I fix my credit score now?”, you need to understand a little bit about what a credit score is and what makes up your credit score. For many of us the phrase “credit score” is rather abstract. It seems like just a number some faceless individual made up and has attached to you, but in reality, everyone’s credit score is comprised of very specific things.
What is a credit score?
A credit score is a 3 digit number generated by an algorithm based on information in your credit report. Everyone has three. The purpose of a credit sore is to efficiently predict risk. It allows potential lenders, employers, etc. to quickly (without reading through your entire credit report) get an understanding of your credit and how likely you are to become delinquent on credit obligations.
Above, where it says “everyone has three” is accurate. You have three credit scores, one for each of the major credit bureaus which are:
- Equifax
- Experian
- TransUnion
You can get all 3 of your credit scores for free on Cafe Credit. Checking your scores does not hurt your credit.
How is my credit score derived?
As mentioned above, your credit score is based on information in your credit report. There are five major categories used to create your score. Keep in mind that they aren’t all equal. In order of most to least importance:
- Payment history – have you made any late payments? How late were they?
- Amounts owed – how much debt do you have?
- Length of credit history – how long have you had open accounts (the longer the better)?
- Types of credit used – what types of accounts do you have (ex. revolving and installment)?
- Credit inquiries / new accounts – are you opening a lot of new accounts? Are a lot of credit inquiries being pulled (this happens when you apply for new credit and sometimes when you seek new employment)?
Now that you know more about your credit score we can get to work answering the question “How can I fix my credit score now?”
When looking for ways to “fix my credit score now”, keep in mind that your credit score isn’t chalk on a blackboard. You can’t take an eraser and just wipe it away in the blink of an eye. Bad reports on your score will typically hang around for seven years and bankruptcies can be reflected in your score for as long as ten years.
However, don’t let that discourage you. There are things you can to do to improve your credit score.
Tip 1 to Fix My Credit Score Now: Establish a History
One of the factors that impacts your credit score is the length of time your credit history has been in existence. This one is a little unfair (in my opinion) because you can’t control it. You can’t start establishing a credit history until your 18 and it takes years to be classified as “good” in this category. This means you need to open up a few credit cards ASAP and keep them open and in good standing.
If there is a card you no longer want to use (for example, it has unfavorable terms), instead of closing it, simply store it away or destroy it. Leaving the account open, as long as you aren’t being charged an annual fee, will do you no harm… in fact, it may actually do you some good as it’ll allow you to keep building a credit history.
Tip 2 to Fix My Credit Score Now: Don’t Apply for a Bunch of Loans at One Time
Applying for a lot of different types of loans (ex. credit cards) in a short period of time can lower your credit score… as can opening a bunch of loans in a short period of time. This is a pretty easy way to fix your credit score. Simply stop applying for a bunch of loans and opening new accounts.
Tip 3 to Fix My Credit Score Now: Pay Your Bills… On Time
Paying your bills on time is probably one of the easiest ways to improve your credit score. If you have problems remembering to pay certain bills, consider setting up automatic payments so that the money is automatically deducted from your bank account each month. If for some reason this isn’t an option, set up automatic reminders on your calendar.
Tip 4 to Fix My Credit Score Now: Pay Down Debt
Lowering your debt to credit ratio by paying off debt is another way to improve your credit score. Paying your debt off on time (as mentioned above) is critical but if you can, you can also pay off debt ahead of schedule to lower your debt to credit ratio. This doesn’t mean you have to make an extra payment each month or anything that extreme. However, if you have an extra $10 each month put that towards paying down debt.
Tip 5 to Fix My Credit Score Now: Check Your Credit Report Regularly
Your credit score is derived from your credit report so you should check your credit report on a regular basis. Familiarizing yourself with your credit report will help you spot mistakes and fraud like identity theft.
You are entitled to 3 free credit reports a year (one from each of the major credit bureaus). You can claim your credit reports here: www.annualcreditreport.com.
Pull a credit report every 4 months and carefully examine it for anything out of place.
In between credit reports, you can use free sites like Credit Karma and Credit Sesame to keep an eye on your credit score. Since these sites are free they don’t provide as much in-depth information as other (paid) services or your credit report but they do give you enough information to make a judgment call about whether you may need to pay to pull a credit report early.
Tip 6 to Fix My Credit Score Now: Negotiate with Collectors
Understand that simply paying off an overdue account won’t automatically remove it from your credit report. If you’re only slightly late, the balance is extremely low, or you’re going to pay the debt off in full, you may be able to negotiate with the collection agency to have the “ding”, so to speak, removed from your credit report. It is important to discuss this with them up front.
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