Finding yourself in a position of bad credit can be extremely stressful. No matter the reason you have ended up there, it can have a huge effect on your financial situation. Consequently, it can see you getting further and further into debt. This is why many people look at the credit repair service to try and restore their credit. So, what is the credit repair process and how does it work for you?
Understanding Your Credit Score
To understand how you get left with bad credit, you have to first understand exactly what your credit score is and how it works. Put simply, your credit score is a number you are given that determines whether you are a risk or not when it comes to taking out a loan.
Depending on the agency you use, the score you are given will be between 0 and either 1,000 or 1,200. If you have a low credit score, fewer lenders are likely to take you on. But if they do, they are likely to charge higher interest rates.
There is a five-point scale used to determine this:
• • • • •
• • • •
• • •
What Is Bad Credit?
There are a number of different factors that affect your credit score and lead to bad credit. These include:
Missing a repayment
Whether you are unable to make the repayment, or simply forget, missing a repayment on a loan can affect your credit score.
Maxing out your credit limit
Many people aren’t aware that this one can affect you. It is known as your credit utilisation ratio. If you are using the full extent of your credit limit, you are deemed as a risk and it affects your credit score.
Applying for several loans at once
Each time you submit an application, this shows up on your credit report and can affect your credit score. If you are genuinely shopping around for the best rate, it is good to do this in a two-week period. This is because the same rules won’t apply and it will only show up as one inquiry on your account.
Your level of debt
As you imagine the amount of debt you have can also affect your credit score.
The credit repair process can help get your credit score back on track to heighten your chances of being able to take out a loan.
The Credit Repair Process
If you do find yourself in a position of bad credit, don’t worry, you’re not alone. There are plenty of things you can do to repair your credit and get back on track financially. Credit repair is the process of cleaning up incorrect or negative listings on your credit file, and there are specific steps you can take to in the credit repair process do this:
1. Start by reviewing your credit report
This is the best way to see where the negative listings have come from. If there is anything there that shouldn’t be, your next step would be to dispute it. If you find incorrect listings that can be removed, this will be the fastest way to restore your credit rating.
2. Pay down your balances
If you are in a position to do so, start paying down your balances to get rid of some of your debt. This will positively affect your credit score over time. Start by paying off the high-interest accounts first, as this will see you paying less money in the long run.
3. Make sure future payments are made on time.
If you really find yourself stuck, consider approaching family for a helping hand to get you back on your feet.
4. Try and use less credit
If you find yourself maxing out on credit cards each month, see if you can increase their limit, as this will improve your credit utilization ratio. If you can’t, instead see if you can cut down on spending so that you aren’t maxing out your cards.
5. Contact your creditors
Finally, if you are still struggling, let your creditors know the position you are in, as they may be willing to negotiate different terms without listing you down as defaulting on your loan. It is always worth asking.
Need Help With Credit Repair?
The credit repair process can take up to 60 days, however, you will find yourself in a far better borrowing position for it, should you need a loan or credit.
If you are looking for some outside help in order to clean up your credit, consider the experts at Clean Credit. They will have you back on the right financial path in no time as a result of their expert advice.