6 Ways to Repair Your Credit Score
Editor’s Note: This article was contributed by Phil Bradford.
If you’ve just finished the process of debt settlement, then you know what can happen to your credit score. Although you’re taking steps to improve your financial situation, your credit score will go down. This is because when you settle your debts you’re paying less than the full outstanding balance. And because you’re not able to pay your entire balance, your credit score may drop by a certain percentage. The very next thing you need to think about is credit score repair.
But, a lower credit score is the exact opposite of what you want. So what should you do?
You have to mend your credit score so that creditors won’t see you as a risk if you apply for credit again.
Credit Score Repair in Six Easy Steps
If you don’t know how to fix your credit score after settling your debts, here are some easy things to do.
1. Check Your Credit Report at Regular Intervals
Your first step toward mending your credit score after a settlement is to check your credit reports with regularity. You must check your credit score consistently to keep inaccurate information at bay. Remember, one incorrect piece of information on your credit report may lower your credit score.
Credit bureaus and debt collectors often make mistakes while updating your credit report. So, you should check your credit report at regular intervals and take actions to correct any errors you find such as wrong debt amounts or an incorrect address.
You can get a free copy of your credit report from the three credit bureaus – Equifax, Experian, and TransUnion once every 12 months. Moreover, you can also request a free copy of your credit report under certain circumstances like:
- You think you’re the victim of identity theft.
- You have been denied a loan.
- You’re planning a major purchase like a car or a home.
- You want to become debt free and repair your credit score.
2. Go to a Credit Repair Agency
If you are finding it hard to mend your credit score after debt settlement, then contact a credit repair agency. There are a number of reputable credit repair agencies in the market. Remember, a credit repair attorney will guide you through the thick and thin of dealing with credit repairing services.
3. Make Regular Payments
Making regular monthly payments on all your accounts is a great remedy for a low credit score. Missed payments or late payments will seriously damage your credit score. This is because your payment history makes up 35% of your credit score. So, if you stop paying your bills, your credit score will get a serious blow. But, if you pay your bills in a timely fashion, your credit score will be saved from the damage and it’ll improve gradually.
4. Use a Mix of Credit
Apart from the various factors that influence your credit score “types of credit in use” occupies 10% your credit score. So, the more of a mixture of credit accounts you hold, the lower your chance for a loan denial from your creditors. Try to have mixed credit accounts like a credit card, mortgage, a student loan, and a car loan.
Having various types of credit accounts shows that you’re capable of managing your credit well, which means creditors and lenders will see you as creditworthy.
5. Start Using Credit Again
If you are thinking of not using your credit card again, then STOP! Doing so will hurt your credit score even more. That’s why you shouldn’t stop using your credit after you’ve settled your debts. One of the best ways to rebuild credit score after debt settlement is to open a credit account and make small purchases with it. But, don’t forget to pay off the balance at every billing cycle.
6. Maintain a Low Balance on Your Credit Card
The best possible scenario is to pay off your credit card balance in full each month. But if you end up in a situation where this just isn’t possible – try to keep your credit card balance below 30% of your card’s limit. It’ll help to improve your credit score. Then shoot for paying off that remaining balance as soon as humanly possible.
Restoring your credit score after debt settlement is not that tough. You just need to have the patience and the confidence to do it.
About the Author:
Phil Bradford is a financial content writer. You can check out his writings at debtconsolidationcare.com. Apart from writing, he loves to cook and read books.