How to Fix Bad Credit for Free
Financial debt may feel like a life sentence without the possibility for redemption but you can learn how to fix bad credit for free in these simple steps. If bad credit feels like having a dark cloud looming overhead, you’re not alone. More than half of Americans are living with poor credit scores.
But you don’t have to stay in the credit shadows forever. There are easy steps you can take to pay down debt and improve your scores. Plus, the best part is these steps are completely free!
To get started, let’s look at how to fix bad credit for free.
Know Exactly Where You Stand
When you know you have bad credit, you’d do anything to avoid looking at your credit report. But be brave! Knowing exactly what is on your reports will jump-start you to a better credit future.
Pull your credit report from all three credit bureaus. You can get a free report once each year. Or, you can use a free credit report service such as Credit Karma.
Your report from the credit bureaus may differ from each other, so read through them carefully. Look for the red flags that are pulling your scores down, such as late payments and high utilization. Once you see what’s wrong, you’ll know what you need to do to correct your credit.
Dispute Any Credit Report Errors
When you read through your credit report, you may notice errors that are counting against you. This could be a collection account that was supposed to be taken off or a late payment that never happened.
You’re allowed to dispute any error. You can do this either through each credit bureau or through a free credit report service. Most of the time it’s as easy as clicking a “dispute” button and entering a comment about the error details.
The time it takes to have an error removed from your report varies, so be patient. If the dispute isn’t successful, you’ll still have a note about the dispute added to your report for creditors to see when they manually view your credit report.
Image Credit: Robert Scoble via Flickr CC 2.0 – Debt Is Not a Life Sentence How to Fix Bad Credit for FreePay Down Outstanding Balances
A big part of fixing bad credit is paying down the balances you owe. That’s because the more you owe, the bigger hit it takes on your credit score.
First, focus on getting any past due accounts current. Payment history makes up a big part of your score, so you want all accounts to show as on-time and current.
If you can’t afford to pay the past due balances, call your creditors to set up a payment plan. Most of the time they are willing to work within your budget.
Next, pay down your balances, starting with the highest interest accounts. Find ways to cut back in your budget to put more money towards your payments. Aim for getting your credit utilization to under 30%, under 10% is ideal.
Get a New Credit Card
It might seem counterproductive to get a new credit card when you’re trying to fix bad credit. But as long as you don’t carry a balance on the new card, it will increase your available credit which will have a positive effect on your credit utilization.
Having bad credit may make it more challenging to get a new card, so research credit cards for bad credit. Pick one that doesn’t have an annual fee.
The goal here is to be smart about it. Get the card knowing you won’t be using it to charge anything. If you don’t think you can keep it without using it, then it may be best to not open the account for now.
Increase Credit Limits
An easy way to fix bad credit for free is to ask for increased credit limits on the cards you already have. The higher credit limit will give you a higher utilization ratio, which will up your credit score.
Call your creditors to ask for the credit increase. Or, many times you can go to your online account and request it.Accounts you have in good standing will be more likely to increase your credit limit. Yet, it doesn’t hurt to ask anyway, the response may surprise you.
But again, be smart about it. Don’t ask for more credit if you’re planning to use it. The goal is to decrease your credit balances, not leave you owing more than before.
Keep Older Credit Cards
When figuring out how to fix bad credit for free, it may seem like a no brainer to close old accounts you don’t use anymore. When actually, doing so will hurt your credit score, not improve it.
Credit history makes up a modest amount of your score. The older your account, the better your credit history will be. Closing it will only have a negative effect on your score.
Plus, that credit limit counts towards your utilization ratio. Closing the card will take that credit limit out of the equation, which lowers your total available credit, lowering your utilization.
If you need to get rid of a credit account, close one of your newer cards. It may still hurt your score but won’t have the impact an older account would have.
Learn What Hurts Your Credit Score
You don’t want all your efforts to go in vain. As you’re improving your credit score, also learn what hurts it so you won’t make those mistakes in the future.
Pay all your bills on time. Always make at least the minimum payments, ignoring a payment completely will only get you closer to a negative charge-off.
Don’t apply for a lot of credit cards at one time. Creditors will be able to see this and think you’re living above your means.Mixing up the types of credit you have is good for your credit score. Don’t have only credit cards and loans. And of course, keep your balances low. Don’t keep maxing out your credit limits.
Brighten Your Financial Future by Learning How to Fix Bad Credit for Free
Step out from under that dark credit score cloud. Now that you know how to fix bad credit for free, you can look forward to a brighter financial future for you and your family.Looking for more ways to get control of your finances? Check out the other articles on our Finance blog!