So your credit score is not the greatest in the world, and you are either having a hard time getting loan terms that you find agreeable, or perhaps any loans at all. In order to move forward to purchase a house or a new truck, you may want to take the steps to build up your score. While the process can require a significant investment in time and money, it can also save you money and headaches in the long-run. Here are some questions you may have and answers to help you raise your credit score.
How can I rebuild my bad credit?
There are generally two ways to rebuild your credit: either work on fulfilling new loans, or fulfilling old ones.
One relatively easy way to build up good, new credit is to use a credit builder loan. These are loans where the lender (usually a bank) holds on to the money you are “loaned”, and then once you are done making monthly payments, you are given the loaned money in full. Different credit builder loans have different terms, some keep the interest on the loan for the service, and others may add the interest into the final amount given to you, with a fee for the service. In short, a credit builder loan is a risk-free way for a bank or credit union to sell you points.
Another way to boost your score is to settle old, bad debts. Call up a creditor who you are delinquent on paying, and offer to pay a percentage of the total due in exchange for having the information removed from your report. Usually, a company will be willing to forgive the remainder of a loan in order to reclaim as much as they can. Just be sure to put up a reasonable offer, though, an offer to pay 10% of the amount due may just lead to them telling you to pound sand. We recommend a 40% minimum. This method is especially common in paying down past-due medical debt.
When you have a low score, most of the loans that are available to you will be secured loans, which have an object behind them that the lender can claim rights to if you default. Common secure loans are auto loans and mortgages, but did you know you can get a secured credit card? A secured card requires you to pay a deposit equal to your credit limit before you can use it as a normal credit card. So long as you make proper payments on the card as you make purchases, the deposit should be returned to you should you close the card one day.
Ultimately, the best way to improve your credit score is to consistently pay bills when they are due, either in full or as much as you can. This will not only look good on your payment history, but it will also lower your credit utilization ratio, another important factor in determining credit score.
How long does it take to fix really bad credit?
While there are quick fixes you can apply to boost your score in a pinch (more on that later), truly high credit scores take some time to grow. Normal forms of debt can take up to seven years to leave your record if you fail to settle in exchange for having it removed.
There is no straight answer to this question. A hard inquiry on your credit, for example, could last anywhere from 3 to 12 months.
Does bad credit go away?
Negative data does eventually leave your report, but it takes a while. Generally speaking, normal debt records take seven years to dissipate, while bankruptcies can take up to ten years.
This makes “riding it out” a potential option, but not a very realistic one. You are generally better off finding other ways to raise your score.
How can I quickly rebuild my credit?
The answer to this ultimately depends on how much money you have to pay down your current debts and to make payments for future ones.
The first step to getting out of any hole is to stop digging. If you are not sure that you can pay a future loan perfectly, it is best to avoid taking it on and risking a dent in your score. As a general rule, older debt is easier to clean up than newer debt.
How can I raise my credit score in 30 days?
Aside from paying off current bills in a timely manner to reduce your credit utilization ratio, there is one last method that may prove fruitful in boosting your credit if you are lucky, and that is to dispute any untrue blemishes on your history.
Use the federally-recognized credit report website, Annualcreditreport.com, and request your free annual report from the three major credit reporting agencies. Meticulously scan the documentation and collect evidence that will support your case in a dispute (for example, proof of your location on a specific date where a payment was made in a different state or country).
When you submit a dispute to a bureau, they have 30 days to get in contact with the creditor to argue the case, or it is removed automatically. Make sure you have grounds for it to be removed from your record and pick your battles wisely: if a credit reporting agency receives a large number of disputes in a short time, they might believe you are not acting in good faith and may throw them all out.
The Bottom Line
Perhaps the easiest analogy for building a good credit score is that it is like losing weight: it is much easier to pile on pounds (debts) than it is to lose them, but there are many different options to work on the problem. Forgoing luxurious purchases can be seen as skipping dessert, and paying down a credit card can be seen as exercise. There is no silver bullet to resolve debt problems, and using a mix of lifestyle changes is the best approach to making meaningful, sustainable gains to your credit score.
Interested in getting a truck or trailer while also boosting your credit score? Go Capital can help! Read below for more information.
About Go Capital
Go Capital specializes in providing funding for small to medium-sized trucking businesses that are looking to buy a used truck or trailer to expand the fleet. Even if your credit is not the greatest, we can work with you to get you or your employee behind the wheel and start generating cash!
Click below to get a no-obligation quote. No hard inquiries, no impact on your credit.