To improve your bad credit score you need to learn how to rebuild credit and know what creditors look for on a credit report, and get details on how various factors that influence credit score. Having a good credit score will determine if the person qualifies for a bad credit loan or good credit loan. Knowing how your score is calculated will help you learn better habits and help improve a bad credit score.
Factors a person has to develop understanding about are:
- How credit score is calculated?
- Is credit score time sensitive?
- How Debt to Income ratio is linked to credit scores?
- Do newly opened credit accounts negatively affect credit scores?
The amount of information you can collect on above mentioned questions will tell how successfully you improve your bad credit score. One of simplest methods which can be used to improve credit scores is disputing errors.
Disputing Errors
To begin with get a copy of your credit report & notice various entries in it. If the credit report shows account balances that have been paid off then next thing will be disputing those values with your credit bureaus. Having incorrect information removed from your credit report will help improve a bad credit score.
As per federal laws credit bureaus must investigate disputes that a person raises & give you a response in a set time frame. Here basically what bureau does is it sends your grievance to your creditor so that it can be validated. Most of the time creditors do not respond within 30 days of stipulated time. Thus credit bureaus eliminate such creditor from the report when response is not sent by the creditor.
Repaying Collection Accounts
Collection accounts cause a score to go down & are a major bad credit problem that requires attention. These collection accounts remain on a credit report for as much as seven years so you can improve your score if these collection accounts can be deleted from the credit report & doing such thing is quite simple too.
In case you decide to repay such collection account then select most recent ones. You need to know that any payment on such collection account automatically resets 7 year clock for which that account stays on a credit report.
Negotiate & pay less
As an example in case debt’s value is $2000 then go for settlement for 15% or lesser amount. If collection agency is not agreeing to it then you can speak about debt verification. As per FDCPA, any collection agency has to show documentation which confirm an outstanding debt & as most collection entries are resold several times, the collection agency most probably does not possess documents for proving debt’s validity. So in most cases by negotiating it is possible to bring down amount need to be paid to a significantly small amount.
Store and Gas Cards
Finally in our discussion on how to improve a bad credit score, we look at store cards which are excellent option in this regard. You can create good credit history by use of store & gas cards as well as departmental store cards before going for credit cards from banks. However, it is worth noting here that quite a few of these stores don’t send credit history to credit bureaus for any account. So prior to getting any such store card you need to collect information on whether such store reports your card account’s history to the bureaus.
You may also apply for credit cards to rebuild credit, as they do approve people with bad credit and report to all credit bureaus.