How Can I get My Credit Score Above 500 - Many borrowers with credit scores under 500 run into the same problem, no one will loan money to them. Whether you need a mortgage, car loan or just a personal loan a credit score that s not above 500 can be a deal killer. Luckily there are ways to increase your credit score to a level above 500.
One issue that you may be facing is not having enough credit. Applying for a secured credit card with a local bank or credit union is a relatively easy way to add a tradeline to your report and get your score above 500. A secured credit card, allows you to pre-pay a set amount of money on a card, and allows you to use the card just like any other credit card.
Some of the common advice given to people pursuing credit repair does not apply to borrowers whose scores are below 500. In particular, borrowers may find that simply requesting increased credit lines on their credit cards and other "revolving" debt tradelines will not be effective, as the credit card companies will also review the borrower's credit in making a decision on whether or not to raise the limit.
Assuming there are no errors on your credit report. You should come up with a budget to payoff outstanding debts while making all other payments on time. Also, try to negotiate balances down to pay them off sooner. These steps over time this will raise your credit score.
Let's face it "BAD THINGS HAPPEN TO GOOD PEOPLE". This is why many consumers fall behind on their bills and are faced with credit scores that are very low or possibly even below 500. Whether it is an illness that has caused you to miss work, outrageous medical bills, being dropped by your insurance company, losing your job, a family member with a life threatening illness, or whatever the case may be, these items are a way of life and many people throughout the nation must deal with these everyday issues all of the time. There are things you can do though to hopefully get you back on the right track with your credit score as soon as your financial situation begins to improve. You can try to improve your credit on your own by rebuilding your credit, you can try to negotiate with debt collectors to settle for less than full balances, you can consider debt management companies or you can consider at last resort filing bankruptcy.
When rebuilding your credit, the most important thing to do when you have a low credit score that is below 500 is to check your credit report for errors. Any errors that you find in your credit report, you need to dispute with the credit bureaus to get them removed. Next you need to re-establish a positive credit history. Any credit cards that you have that are still open you need to start making on time payments. Any installment loans that you have such as an auto loan or a mortgage loan you also need to begin to make all of your payments on time. If you no longer have any open accounts that you can make payments to then you will need to obtain a couple of secured credit cards in order to reestablish your credit history. Finally, with time and taking care of the above items you will be able to get your credit score above 500.
Why is my credit bad? - Your credit maybe considered bad and causing a low score for a number of reasons. While there are numerous reasons for bad credit some of the more common ones are as follows. You have numerous credit cards that are maxed out or close to the credit limit, you have unpaid judgments or collection accounts, you have 30 day late payments showing on your payment history. All of these examples can cause severe drops in your credit score.
Here is a general guidline which outlines the five major types of information used to calculate a FICO score. Each type of information counts as a percentage of a total FICO score:
- 35% Payment History
- 30% Amounts Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of credit
Watch on your credit report for companies that are illegally renewing the chargeoff date every month in order for the account to never gain history. These companies you should call and address this immediately.
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You should frequently check your credit report at least twice a year to know what your credit profile looks like. Sometimes erroneous items appear on credit that you may not know about and when it comes time to utilize your credit it can affect the rate you will get. Depending on the state you live in, you are allowed at least one free credit report per year from each of the three major credit bureaus; Experian, Equifax and Transunion.
If you have old collections on your credit report, paying them off now can actually hurt your credit. Credit Agencies look at the age of a delinquent item: if you pay it off the "date of last activity" becomes recent instead of old. There are many reputable credit repair agencies or credit counselors that can help guide you in restoring your credit.
Paying down your credit card balances to around 30% will help your score. If you can, try to keep the balance at that level at all times. If you need to raise your score quickly, and don't have the money to pay down your balances, you may request that your creditors increase your credit limit. This will in turn lower your balance in comparison to the limit.
Only use this technique if you are responsible with your credit. Once your limit is increased, it may be tempting to go on a shopping spree. Know that if you do this, you will be in a much worse situation than when you started. Not only will you have more debt, but you will increase your ratio of balance to limit.
If you do decide to pay off some of your credit cards, be sure to leave the cards open. The credit bureaus look favorably upon accounts that have been open for a substantial period of time, especially if they are showing a zero balance.
There are several ways to increase your credit. However the fundamental principle is the bills must be paid on time. This doesn't mean by the due date. For the sake of your credit a payment must NEVER be more then 30 days late. If you are acquiring 30 day lates on your credit then your credit standing will deteriorate quickly. Judgments also hurt your credit even if you pay them.
Remember that a credit score amounts to a prediction of how likely it will be that you go 60 days late or more on your mortgage in the next two years. One thing that will really lower this score is if you carry high balances on revolving debt and then start making a few of the payments late. This is the pattern of a consumer who is close to getting in trouble with debt.
Things that may go into a collection or judgment that will hurt you credit include unpaid medical payments, unpaid utility payments, and unpaid cell phones or cable payments.
It is also important to note that a credit score is a snapshot. Although it shows your payment history, length of credit, etc., having inaccurate (negative) information removed from your credit bureau report will immediately reflect an increase in your score.
Maintaining high balances on your credit cards and other revolving debt negatively impacts your credit score. Paying down credit cards balances below the 70%, 50%, and 30% thresholds is a quick way to boost your credit score.
Your credit can be bad for a variety of reasons:
High Account Balances
To minimize negative on your factors you will need to pay down balances, make payments on time, dispute incorrect information, and let the passing of time lessen the impact of past bad credit.
If your credit score is low because of a high balance on a credit card, transfer some of the balance to another card. Try not to open a new card because to do this can also reduce your score.
Why is my credit bad? Credit is merely an indication of how likely you are to repay a loan. By paying obligations on time you can have good credit. Even if your credit is bad, it can be improved by talking to your mortgage professional.
One area people overlook that can negatively impact their credit report is failing to honor mobile phone contracts. Cell phone companies give away free phones to customers who sign on with their services for a specified period of time, usually one to two years. Terminating subscription to the phone service before the expiration and failing to reimburse the phone carrier for the cost of the free phone is considered breaking the contract. Cell phone companies would then report to the credit bureaus and cause a blemish on the credit history. Such blemishes are not serious, but they nonetheless lower credit scores.
Credit scores generally range from about 350 to 850.
- 800+ = great credit
- 700-799 = good credit
- 600-699 = average credit
- 500-599 = bad credit
- under 500 = hard to get a loan at all
Too many inquires at one time can affect your credit score.
One reason why your credit may be bad is because of erroneous information reported on your credit report. This can happen to anyone and is actually quite common. This is one reason why you need to check your credit report out at least once per every 12 months. By checking you credit report for free you can keep an eye on your credit and make sure that you take care of any erroneous information when it happens, not when you are trying to apply for a loan and it comes as a surprise to everyone. Utilize your one free annual credit report each year to take a look over your credit to make sure everything looks well. There are many reasons as to why credit report errors can happen so make sure that if errors do happen to you that you rectify the situation immediately.
Although many inquiries can hurt your credit rating, inquiries within the same industry in a 30 day period will not negatively impact your credit score. They will simply be counted as 1 inquiry. Consumers are not punished for shopping for the best deal.
Whats the quickest way to increase my credit sco? - Delinquencies are just one reason credit scores fall. Most people do not realize that balances on revolving credit has a huge impact on your scores as well. As a rule of thumb, you ideally want to keep your balances on credit cards, equity lines, etc. below 35%.
The first thing you should do when trying to improve your credit score is to obtain a current credit report from all 3 credit bureaus (Equifax, TransUnion, and Experian). This will let you know exactly what is hurting your score the most, and give you a chance to identify anything that is being reported inaccurately. Dispute any errors immediately with each bureau to begin getting your credit back on track.
Many credit vendors offer "rapid rescore" type products, which tell you exactly what items to correct and what effect it will have on the credit score. Usually, you can fax the documentation needed and have the score raised within a few days. There is an extra charge for this type of rapid rescore.
When is the last time you requested a credit limit increase? A higher credit limit can increase your score because it reduces the ratio of credit used to maximum balance. A good general rule for optimizing your credit score is to call you credit card companies every six months to request a credit limit increase.
If you have any errors on your credit report then this is where you want to focus your enegery.
Call the creditors that have reported the error and obtain a status letter about the history of yur account. This might take some effort if this is a collecton agency but well worth the effort.
Once you have the letters stating your status, mail the letters in the credit agencies for an update. The update process will take about 30 days.
If you have zero credit and cannot qualify for a credit card or car loan, nevermind a mortgage, a secured credit card is always a great place to start. Most banks provide secure credit cards. You bring them the amount you wish to open the card with. Some banks may have minumum limit requirements. For a $300 card you would deposit $300 into the secured credit card account, and the bank literally draws off your own money, not taking a risk to their own funds, while still giving people the opportunity to build initial credit. The credit bureaus typically estimate that such a card will generate a positive impact in roughly six months. Then, unsecured cards and other charge cards may be available to continue building credit depth and better scores.