If you think that your credit sucks, you’re not alone.
While the average credit score in the U.S. today falls just above the line between a “good” and a “bad” score, at 710, around half of all borrowers have a score that falls under that line. About 30 percent have a score that’s considered “subprime,” meaning that it falls below 600.
Having a poor credit score can lead to all kinds of financial trouble. It can make it difficult to get a loan or leave you with no option but to accept sky-high interest rates. It can even stand in the way of getting your dream job or that perfect apartment.
On the opposite end of the spectrum, having a strong credit score can open up a variety of opportunities, like lower rates on your insurance or a better interest rate on your auto or personal loan.
Feeling stuck in a rut with a bad credit score? You’re probably wondering what you can do about it. Keep reading to find out.
Get to the Root of Your Score
Before you can start working on improving your credit score, it’s important to figure out what exactly is dragging it down.
A shocking number of people don’t know what their credit score is, let alone what financial missteps they’ve made to cause it to drop. One in every eight Americans is unaware of their score. Nearly 50 percent of people in one survey hadn’t checked their score in the past two months. A lot can happen in two months.
Checking your credit score isn’t enough; you also need to look at changes to your score and the factors that may have caused them.
For instance, if your score suffered a sudden drop, ask yourself what may have caused this. Did a missed bill go to collections? Take on a new and substantial loan? Did you declare bankruptcy? Or, is it possible that the drop is a mistake?
Every month, you should be checking your credit score and keeping track of any financial moves that you’ve made that could have caused a drop or an increase. This will allow you to track mistakes, and to start making the right moves to improve your score.
Understand the Factors That Affect Your Score
Most people realize that bad financial moves like missing your credit card payment or defaulting on a loan will affect your credit score in a negative way. But fewer realize exactly how these moves affect your score.
Understanding how your score is calculated is important if you want to start working to improve it.
Different financial moves and factors affect your score by a certain percentage. The exact factors that affect your score, and how much they affect it by, isn’t a hard-and-fast rule. That’s because credit reporting agencies don’t release exactly how they calculate scores. However, experts have narrowed down some common calculations.
For instance, your credit utilization rate accounts for around 30 percent of your credit score. And experts recommend using 30 percent or less of your available credit in order to avoid taking a hit in this area of your score.
Make it a goal to not only check your score frequently, but to also learn how various factors, like your credit utilization rate, missed payments, or mistakes, affect your score. This will help you to choose the right strategies for beginning to improve your score.
Set a Budget
Many of the financial mistakes that can cause your credit score to drop can be linked back to a lack of funds.
You miss a loan payment because your paycheck didn’t stretch far enough that month. You’re forced to use more of your available credit, raising your credit utilization rate, because you’re short on cash. You have to declare bankruptcy to get creditors off your back.
Whether you’re living paycheck to paycheck or just having trouble managing your money, setting a budget can help. Use your budget as a chance to take a look at areas where you may be overspending, and to look for areas where you can reduce what you spend each month.
Saving even a couple of hundred dollars each month can go a long way towards paying off loans or lowering your credit utilization rate, which will in turn help to improve your credit score.
If you’re stuck in an endless cycle of poor financial decisions, it can feel impossible to make any sort of progress to improve your score. Luckily, you don’t have to go it alone.
Credit repair services can help you to get to the root of your bad credit score, and start making the right moves to improve it. But choosing the right help is important, too.
Many credit repair companies offer endless products and upcharges that promise to set you up for a brighter financial future. But these may only set you back even further on your money goals.
Credit Innovation Group is different. We’ll pair you with a personal credit profile specialist who will help you create a personalized plan for setting a budget, paying down debts, and improving your score. You’ll get realistic goals and the strategies that you need to achieve them, so that you can finally start making the progress you’ve been dreaming of.
Saying Goodbye to Credit Scores That Suck
A bad credit score can stand in the way of your future financial success. But a few smart financial moves and some savvy knowledge can help you to turn your score around and set yourself up for a brighter future.
If you’re ready to say goodbye to credit scores that suck once and for all, click to learn more about how Credit Innovation Group can help you take back control of your finances and credit score.
From developing a budget with the help of our Cashflow Accelerator to building a stronger credit profile by optimizing your current accounts and choosing positive new ones, you’ll get the strategies and tools you need to start making progress today!