At Lambert & Jakob, we often handle cases regarding consumer credit law. Specifically, we specialize in home equity loans, lender liability, usury, debt collection, credit regulation, consumer protection, mortgages and secured credit, and commercial credit.
Credit is incredibly important to our economy, and without a good credit score, it can be difficult to move forward, whether in business or personal life. Your credit score affects your ability to lease a car or apartment, receive a loan, open a credit card, and more. So what can you do to repair a bad credit score? Let’s start with the basics.
What is credit?
Credit is what tells a lender how likely the borrower is to repay a loan. Your credit score is based on your borrowing history––how many loans you have taken out, whether or not your payments were made on time, and whether or not the loan was paid in full. Basically, if you have a high credit score, lenders are more likely to form a lender-borrower relationship with you, whether your request be for a mortgage, an apartment lease, or a student loan.
What is considered a good credit score?
Although this isn’t necessarily black-and-white, as some lenders have their own specifications, this is the typical range of credit scores, according to credit.com:
- Excellent Credit: 750+
- Good Credit: 700-749
- Fair Credit: 650-699
- Poor Credit: 600-649
- Bad Credit: below 600
In other words, the higher the credit score, the better.
How do you get a bad credit score?
One of the most common reasons bad credit is achieved is because of missed credit payments, whether that be a credit card bill you’ve been avoiding or a mortgage you haven’t been able to keep up with. Accounts sent to collection agencies cause your credit score to lower. Additionally, a repossessed item, such as a car or a home, will damage your credit as well.
How do you repair a bad credit score?
Don’t get discouraged if your credit score is low. You can rebuild and repair your credit, it just takes some time and diligence. So how do you begin the repair process? Begin by checking your credit reports to make sure everything is accurate. Stop using your credit cards. Chances are, you’re already in debt. The first way to eliminate debt is to stop adding to it. Make a spreadsheet of all of the debts you owe, the minimum payments owed on each one, and the interest rate. Then, start prioritizing. While you need to make payments monthly for each debt owed, you may want to pay more than the minimum payment for those debts with the higher interest rates, if your budget allows it. The faster you can get those paid off, the better.
If an account is sent to a collection agency, some people think it’s better to forgo other monthly payments in order to pay off that debt. This is a misconception. Once the account is in collection, the damage is already done. Continue to pay off this debt, but do not miss payments on your other accounts.
Remember to always make payments on time. A payment that’s even a few days late can begin to hurt your score if it happens often enough. Additionally, stay current on all payments. If you have missed payments from past months, make sure to get caught up.
If you’ve gotten caught up with bad credit, don’t get discouraged. It will take time and hard work, but you can repair your credit! By making a few lifestyle changes and tackling your debt, you can restore your good name and leave your bad credit in the past. If you get to a point where you feel that legal help is necessary, contact us to set up a consultation.