Low credit scores have far-reaching implications. First, borrowing becomes difficult or impossible, as lenders regard you as a risky client. Secondly, you may fail to get the perfect job or apartment, as lenders and employers check credit histories as well. So, what is the worst possible status, and how can it be improved?
Different Assessment Systems
The two most popular scoring methods in the United States are FICO and VantageScore. In both, 300 is the lowest possible total. FICO regards anything under 580 as very poor. In the second system, this category includes totals between 300 and 499.
The best credit repair companies in 2021 can raise the total if it is unfair. Sadly, this happens fairly often. According to the latest statistics, one in five US citizens has at least one flawed report.
All scoring scales are based on items in your credit report. They also use similar combinations of factors. For instance, the most consequential elements triggering a credit score drop in FICO are:
- payment history (35%);
- the total amount of debt (30%);
- age (length) of history (15%).
The other factors — credit mix and new accounts — contribute 10% each. From this breakdown, it is clear why missed or late payments are some of the most damaging items on the records. Another important criterion is credit utilization. This is the proportion between your total credit limits and balances. The more of your available debt has been used — the higher the indicator.
How to Check
You can easily check your total using apps like Credit Sesame or Credit Karma. Alternatively, head to www.myfico.com. You may also get a free copy of your official report from each of the major bureaus. Download the data from www.annualcreditreport.com. Until April 20, 2022, this free service is available weekly.
After collecting your records, you need to study them meticulously. Identify any inaccuracies affecting the score. For example, you may see late payments that never happened, false bankruptcies are evictions. Any such details may be formally disputed and removed. There are two ways to do it — by yourself or with the help of a repair company.
Boosting the Total: Overview
If the score is too low, your strategy will depend on the causes, as well as goals. How many points do you need it to rise by? If you are planning to apply for a mortgage, the lender will have a specific threshold, such as 650 points. Generally, loans backed by the government are easier to secure. There are two ways to increase the total — through rebuilding or repair.
Increase Through Rebuilding
By focusing on the most influential components, you will achieve an increase faster. For example, it is possible to adjust the credit utilization ratio quite quickly. This indicator is linked only to credit cards, or forms of revolving credit.
- If the bank agrees to increase your credit limit, this will boost your available credit and the ratio along with it.
- You could pay off most of the balances for the same effect.
- If you get a new credit card, it will contribute to the size of available credit, which causes a rise, too.
If you have a history of late or missed payments, reconsider your financial habits. Why did you fail to fulfill your obligations? If this happened by accident, set a reminder, so you never miss another due date.
If you forget to pay regardless, contact the bank as soon as possible. The institution may agree not to report your delay if it is insignificant. However, it is not obliged to comply with your request. Most lenders report information based on a 30- or 60-day cycle. This determines how much time you have.
It is also possible to gain a few points by adding more information to the reports. Currently, only one agency allows it. Through Experian Boost, you may add utility bills and other payments — even your Netflix subscription — to push the score up.
For irresponsible borrowers, rebuilding takes years. It is much easier to clean erroneous records. On average, repair takes between 2 and 6 months. In the most complex cases, it may last up to a year. Here is everything you need to know about these services.
Increase Through Repair
The law allows every citizen of the United States to dispute any errors for free. This is a complex and rather challenging process. After collecting the data and scrutinizing it, you should collect evidence to prove that the entries in question are erroneous. Then, compose formal dispute letters and send them to bureaus by certified mail. If the corrections are accepted, the report is amended, and you get a free copy by mail.
When there are just a couple of errors on the records, doing everything yourself is quite feasible. Sadly, this is not always the case. What if you spot mistakes in all the reports? You will need to liaise with three bureaus simultaneously.
It is also crucial to collect complete evidence from the get-go. If the bureau asks for more information, the process will be prolonged. By law, every agency has 30 days to investigate a dispute claim and send a reply. You can imagine the delays caused by such back and forth.
The Best Solution
A credit repair company will analyze your data, find errors and dispute them on your behalf. This may involve different types of formal correspondence with lenders, bureaus, and collection agencies. Usually, you can track the progress via a web portal or a mobile app.
Delegation is the fastest way to have the score fixed when it is inaccurate. Of course, it is only possible with reliable providers. Compare BBB ratings and genuine feedback to choose a company you can trust. Top firms have a money-back guarantee, so clients get refunds if no items are removed within the first 60 or 90 days.
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