Getting Out of a Bad Credit Score Situation

Having a bad credit score can be a big problem. It’s not just about having worse access to loans and other similar products – that’s just one consequence of the whole ordeal. With a bad credit score, your life will be significantly limited in many aspects. And with the way society is moving forward right now, chances are that those restrictions are only going to get worse over time. It’s becoming more and more important to maintain a good credit score if you want to do things like rent an apartment, get a phone contract, and more.

If your score is currently less than ideal, that’s something you need to work on as soon as possible. The more you delay fixing your credit score, the more this is going to hurt you in the long run. It’s not something that will happen overnight, either – you have to put in active effort to address the problem, and you’ll need to be patient until you’re in the clear.

Start with a Plan

You need to have a directed approach to this. Whatever you do, you can’t just randomly make payments here and there and hope for the best. Make a list of all lines of credit and monthly bills you have, and sort it according to how much each of them impacts your credit score. Then just start going through the list one by one, prioritizing the items with the biggest impact. Your goal is to have those paid off as early as possible, which will give you more freedom to figure out a solution for the other, smaller problems.

Seek Support

Don’t be afraid to reach out for help if you’re feeling troubled. Financial distress can happen to anyone, and it’s a big mistake to avoid seeking support and letting others know how bad things are. Sure, it might seem shameful to admit that your credit score has gotten so low, and that you need help fixing it, but that’s nothing compared to the conversation you’re going to have if you end up defaulting on a loan or suffering some other consequence of your situation. Whatever you do, you must not let things get that bad – and this starts by talking to someone else.

Careful When Calculating “Heavy Hitters”!

We mentioned that you should prioritize getting rid of loans and other credit lines that have the biggest impact on your credit score. However, be careful with your calculations in this regard. It’s sometimes easy to get misled about the way a certain loan affects your situation, and you might end up putting a lot of effort into the wrong thing for a lot of time. If you’re confused about the exact implications of each loan, refer to what we said above. Talk to someone more experienced and ask them to guide you through this until you can figure things out yourself.

Make Sure This Never Happens Again

During the whole ordeal of fixing your credit score, you should also constantly analyze the situation to figure out how you got there in the first place. Often, you can trace your credit score problems back to a few specific issues in your financial history. Whatever you do, make sure that you never let these things happen again. It might sound like an obvious hint, but you’d be surprised how many people expend a great deal of effort to fix their credit scores, only to find themselves back in the exact same situation a few months down the road.

And considering that it doesn’t even take a lot of effort to prevent that from happening in the first place, it’s unfortunate to see that all around us. You don’t have to be part of this problem though – just be responsible about the way you use your money.

Take Advantage of Your Improved Score

Make sure that you use your newly boosted score to its full potential, on the other hand. If you need to take out a loan, now is the time to get one with a good interest rate and other attractive features. As long as you keep what we said above in mind and don’t go overboard, you should be fine. After all, your credit score is designed to be a helpful tool in the first place, so it doesn’t make sense to just accumulate a good one and let it sit there idly. Just make sure that you know what you’re doing and don’t get yourself into debts that you can’t realistically cover. Your good credit score is not a magic wand that can produce free money for you, after all!

How Are Credit Scores Calculated?

If you’re looking into personal loans and other similar areas, the topic of credit scores will inevitably pop up sooner or later. Everyone is aware of credit scores and the fact that they should be striving to keep their own at a high level – but do you know exactly what goes into determining your credit score, and what defines a “good” score in the first place?

As it turns out, a shockingly low number of people have an even basic idea of what’s going on behind the scenes, and where those numbers are coming from. If you are in that category, you owe it to yourself to change that fact as soon as possible. Otherwise, you might continue living your life with some wrong assumptions, and make the same mistakes many other people do.

Basic Concepts

The most basic idea behind a credit score is that it indicates how trustworthy you are as a borrower, or a customer in general. Your score is affected by a number of factors, such as how regularly you make payments on outstanding lines of credit, whether you pay your bills on time, as well as more serious issues like defaulting on a loan and bankruptcy.

Generally speaking, any time you do something that a creditor might want to know about, you can assume that it will impact your credit score. It might not be by much, but as we’ll see below, even small differences can matter a lot in the long run. That’s especially true if you allow them to start stacking up at some point.

Low and High Values

Your credit score doesn’t start from 0. 300 is generally considered to be the bottom line for most people’s credit scores, although there might be some exceptions in some very specific situations. Anything above that is an improvement. The higher your score goes, the better access you’ll have to financial products and services on the market.

Values above 750 are considered “high” and will generally give you the best possible deals on the market as well as access to certain exclusive offers that might not be available to people with lower scores. The top of the bar is at 850, although very few people can boast with such a high credit score. 850 is more of an ideal value that’s not achievable under realistic circumstances in most cases.

Small Differences Can Mean a Lot

As you can see, there’s a pretty big gap between the top and the bottom of the chart. This might lead you to think that someone with a score of 450 is not too different from someone at 500 – but you’d be wrong. Even small differences can matter a lot when it comes to your credit score. It’s not rare to see something as low as 20 points changing the conditions of a deal offered to someone. Every single point counts when you’re trying to get the best conditions the market can provide you with, which is why it’s so important to ensure that you never miss a single payment if you can afford it.

Check Your Credit Report

Your credit report is a summary of all your financial activities – things that have impacted your credit score. Any time you do something “good” or “bad”, it will go in there. But in most cases, you’d only be concerned with the negative marks in your credit history. It’s a good idea to check your credit report regularly to ensure that there is nothing in there which you don’t expect. Mistakes can happen, and sometimes a company might forget to erase a negative mark after you’ve fully paid off a loan, for example.

You are allowed to request one free copy of your credit report per year. This is only valid if you go through the main agencies though – there are lots of middlemen on the market who will charge a fee for the service. Anyway, make sure to take advantage of that offer on a regular basis. Go through your report every year, and if you spot anything that looks out of place, get in touch with the corresponding company and try to get it fixed. If that goes nowhere, you can dispute the entry on your credit report. As long as you have proof that you’re in the right, it will eventually get removed.

Many factors can play into determining your credit score, and sometimes you might find it at a lower level than you anticipated, simply because you neglected a certain factor in your life. Understanding how the system works and taking full advantage of the tools it provides you with is important if you want to ensure that you have a good score when you need it one day.