Fix Your Credit History: 5-Step Guide to Getting a Good Credit Score

There are different ways to fix credit history. Some require considerable financial effort, time, and dedication. Others require credit knowledge and “outside the box” thinking. Understanding how the credit system works and what the holes in it are will put you in a better position when trying to figure out how to fix credit. Knowledge is power and this is especially true when it comes to credit repair.

Here’s a 5-step guide that will help you fix your credit history faster than you think:

1. Where are you standing?

Where are you on the credit scale? The three-digit FICO score assigns you a certain number from 300 to 850. These numbers help creditors, employers, landlords, and insurers determine if you are risk-free. It goes without saying that good credit gives creditors a “green light” while bad credit closes many doors in front of you.

2. Where do you have to be?

What is “good” and “bad” on the scale of 300 to 850? What is excellent and regular? In today’s economy, you probably need a score of 760 to qualify for the best rates a lender has to offer. However, different lenders have different criteria. Knowing where you stand and where you need to be is vital to successful credit repair.

3. Clean up the bugs first.

Don’t assume your credit report is free of errors. According to statistics, more than 40% of credit reports contain errors. Lack of communication between lenders and credit bureaus and imperfections in the heavy bureaucratic machinery are the main reasons for this. Request a copy of your free credit report and look for any inaccurate information. Dispute any erroneous items on your credit report. Also report the dispute to all major credit bureaus. You don’t always know which agency creditors report to, so it’s a good idea to submit dispute forms to all three.

4. Take care of late payments.

Payment history is the single most important factor in your FICO score. One late payment can drop your score by almost a hundred points. Taking care of late payments (including things that seem unrelated to credit score, like rent and utility bills) will boost your credit instantly.

5. Handle collections the right way.

Collections are one of the paradoxes in the world of credit. If you have an old collection, you better not pay for it. The older the collection, the less influence it will have on your overall credit score. When a payment is made to a collection account, collection agencies update the credit bureaus to reflect the account’s status as “collection paid.” The item is still negative (although paid for), but it is now more current and therefore has more of an effect on your FICO score. The only way to get rid of the collection’s negative effects is to get rid of the collection itself. Negotiate with the collection agency until they agree to remove the collection from your report.

These are just some of the ways you can fix your credit history. There are many other lesser known secrets that can help you improve your credit in no time. Quick credit repair isn’t difficult, but you need to start thinking outside the box first.