A bad credit score is not a life sentence, there are steps that you can take to raise your credit. First, it is important to know what could have led to your poor credit score. With this knowledge, you can make changes that are necessary to get your credit score back on track. Here are some common actions that lead to lower credit scores:
One reason may be that you have defaulted on school loans. School loans are considered “good debt” until you miss too many payments. This means that your credit score should not be affected by the amount of education loans you have taken out unless you continuously skip your loan payments. When this happens, it is known as defaulting on a loan. Going into default will lower your credit score.
You have accumulated high credit card balances. Maxxing out your credit cards by reaching their limit is a main factor of low credit rankings.
Your property has been foreclosed on. If you cannot make payments on your home or other property for a long time, then eventually your mortgage lender may take ownership of that property in order to sell it to recoup the money that you owe them. This is known as a foreclosure and it negatively affects your credit.
Now that you know the actions to avoid to have good credit, here are some of the steps you can take to repair your credit.
- Request your credit report so that you are familiar with your credit score.
- Check your report for errors. It is estimated that as many as 25% of credit reports contain errors. If you think you have a mistake on your report, you can contact a credit bureau to file a dispute.
- Pay off debt whenever possible. It is especially important to pay off your credit cards on time. Be careful with credit limits, do not spend money just because your line of credit increases.
Once you pay off a credit card, do not close it. Having paid off, but active, credit cards will help improve your credit. Closing cards can make it difficult to build a healthy credit history.
Learn about the credit bureaus that create your credit report.