It happens, you apply for credit only to be told you don’t qualify. The reason… Your FICA Credit Score is 560. For many borrowers, this is the first they know about the state of their credit health. Don’t panic there are ways to repair your credit. First, you need to get a copy of your credit report, you can use a service such as CreditKarma. Alternatively, you can request the report directly from the agency that supplied it to the lender you applied for credit with.
Since all consumers reports are unique, no one can state with certainty how long it will take to achieve an acceptable credit score. (680 – 740) For most the rule of thumb is 6 – 12 months to see a significant uptick in their rating, still for others it will take much longer. This is dependent on how many negative items are in the report. The first thing you need to do is apply for a no credit check secured credit card, and use this card for purchases you would typically pay cash for, such as groceries or gasoline. Now follow the steps below, and remember to be diligent with the monitoring of your score.
- Carefully check your credit reports! (you really should get copies of all three) Remember not all lenders report to all credit bureaus, and significant discrepancies can be found by checking all three against each other. The last thing you want is to see you have fixed problems on one report and then notice that there are other derogatory remarks on one of the others. For many people at this point, it makes sense to bring in a credit repair agency. You should first compare reputable credit repair agencies in order to make the right choice for you.
- File disputes on any item/s you find that you do not believe are legitimate. This can be a time-consuming process, but in the end, it will be worth it. There are time limits on how long a derogatory remark can remain on your report/s (7-10 Years is usual) You can go to the home page of each bureau to find the process to dispute an item on your report. [Note: You will have to dispute each item individually on each of the three bureaus.] Here are the links: TransUnion, Equifax, Experian.
- After you are sure that only legitimate remarks are on your credit report/s, contact the lender or if already charged off, the collection bureau/s and set up a payment arrangement that you are sure you can fulfill. Most of the lenders and collection agencies will be more than willing to work with you to satisfy your debt to them. Don’t apply for any form of credit while in this process. Every time you fill out an application, a credit report/s will be requested by the lender. These requests quickly lower your score even more. Every inquiry takes two years to fall off of the report!
- Carrying a secured credit card! Most experts recommend choosing one with the following properties: low APR and annual fees, reports to the three major scoring bureaus (Equifax, Transunion, and Experian) and thirdly comes with tools to help consumers rebuild their credit history. Although you will rarely find a card that satisfies them all, you should try to find one that meets at least two of them.
- Manage your money! First, make a budget and stick to it no matter what! Next, keep all payment arrangements you have made. Make your payments 5-10 days before the due date each month. Then, pay off 80% of your balance on the pre-paid card each month. Don’t pay it in full! Do pay it ten days before the due date, and do not use it until ten days after your due date. That part is vital because when the card is reported each month if your balance is over 20% of the available credit, it will hurt your score not help it!!
- Last but not least! Keep the pre-paid card even after your credit score rises, and keep using it in the same manner. If you cancel the card it will drop your score significantly as this is what your new score is based on. Do not jump on the predatory credit card companies offers you will start getting in the mail! Wait until your score is 700 or above and then apply for a card from the bank in which you keep your primary checking account. Only apply for the one card and keep the balance low (20%) at all times!
Improving Your Credit in 6 – 12 Months is Attainable
If you carry a secured credit card, pay off your legitimate debts and manage your finances properly, your borrowing score will improve significantly. Now it is time to stick to the discipline you have acquired to get this far and do not overextend yourself again. If you live within your means, you will keep a healthy credit score, and be able to make significant purchases such as a new home, or automobile with an attractive interest rate when needed.
If you find you need help with navigating your credit and finances you can contact in the USA The National Foundation For Credit Counseling (NFCC) for help.