Too many people, young and old alike, get lackadaisical with certain elements of their personal financial lives. The result is predictable. Bad credit! Let’s be very plain here. Bad credit is not something you want, especially if you ever intend to take out a home loan. And with more employers checking credit before making a hire, a low score could actually hurt your employability.
The bad news is that bad credit sucks. The good news is you can legitimately repair it, maybe not to its original unblemished shine but enough to maybe snag a decent rate on your next loan.
First of all, what is a good credit score? Here’s our breakdown:
- 750 and up: You’ve got no worries. Easy credit at great rates.
- 710 – 750: Not top of the heap but you’ll still qualify at competitive rates.
- 650 – 710: No problem getting approved but your rates won’t be the best.
- 580 – 650: You’ll get credit but at higher rates and average terms.
- 580 and below: Loan sharks might even turn you down
Luckily, your credit score isn’t etched in stone. Here are three of Jason Hartman’s recommendations to turn an anemic number into a healthier one.
Be On Time
Timeliness of payment and credit use level counts for a full 65% of the credit score equation, so if nothing else, make your payments on time. 30 or 60 day late payments go away relatively quickly after you make restitution but it takes awhile for the sting of a 90 day late payment to fade.
How Low Can You Go?
It’s best if you use less than 35% of the credit available to you. Higher than that and lenders start to get nervous. If you plan on applying for a loan soon, do your dead level best to get down to 10% usage or less.
Talk to the Collector
Strange but true – paying off accounts that have been sent to collection might not help your score that much. The big hit comes when it’s sent to collection in the first place. If you do decide to pay it off, get the agency to agree IN WRITING to mark the account as paid and remove it from your credit report entirely.
Lastly, keep in mind that as many as 80% of credit reports contain errors, many of which are significant enough to drop your score as much as 50 points. You should review your Equifax and Transunion records once a year for accuracy. Got good credit? Good for you! Treat it like the precious commodity it is. (Top image: Flickr | Match Financial)
The Young Wealth Team