If you have been turned down for a loan by various creditors, it’s time to learn about your options. Repairing damaged credit is possible and, in many cases, even likely. Credit repair can be tedious and you’ll need to do some legwork but it’s worth it if your credit score isn’t holding you back from the loans and credit cards that will help get your finances on track. In this article, we will explain the basics of repairing damaged credit, what you can do to work toward this goal and some useful resources for further information.
Determine Why Your Credit Was Damaged
It is important to know the why before you can start repairing damaged credit. The type of event that caused your credit score to dive will determine which methods you should use to repair it. There are several reasons that your credit score may have been damaged: late or missed payments, maxed-out credit cards, collection accounts, foreclosures, bankruptcies, and short sales. Once you know what caused the damage to your credit, you can begin attacking the problem.
If you went through a credit crisis and feel your credit score hasn’t hit rock bottom yet, don’t wait. The longer you let credit issues linger, the more damage they can cause to your credit rating. At the very least, contact credit bureaus and ask them to raise your credit limits or add an authorized user (if that person is trustworthy) to one of your credit cards.
Pay Off Collection Accounts
The next step in damaged credit is by paying off collection accounts. Collection accounts will weigh down your credit score tremendously, sometimes pulling it down 100 points or more. If this is the reason that your credit score dived, you must pay them off as soon as possible.
Paying off collection accounts can be a bit more difficult if they have been sold and resold multiple times. Make sure to request payment verification from the original creditor before sending payment so you aren’t wasting money on a debt collector who has no actual authority over your account.
Some collection agencies will also let you pay part of the debt and set up a payment plan for the rest. This might be a better option than full payment if you cannot afford to pay off all of the debt at once, but it may require more patience and time on your end. Either way, be sure to regularly check your credit report so that you know when it has been updated from “collection” to “paid.”
You Can Get A Credit Card
You surely feel like there is not much that you can do in this situation, however, credit cards might be an excellent credit repair option. Credit card companies usually aren’t looking for credit reports that show repayment history, instead, they are looking for creditworthy customers who will be able to pay off their credit card balance every month. If your credit score is anywhere between 300 and 625, then credit cards for bad credit history tend to be your best option. These credit cards generally have the highest rates of approval and you’ll just need to be sure that you can pay your credit card balance every month.
Get A Loan And Pay Your Debt In Full
If your credit score is below 620, it might be hard to get a loan for a house or a car. However, there are still a lot of loans that you can get and pay in full if you have the cash available. Personal loans, for example, can give you up to $15,000 without collateral but they usually have high interest rates so make sure to compare between lenders before settling on one.
You should keep in mind that even with these loans, your credit history should be pretty clean from any previous late payments or collections to qualify for them. If your score is too low though, try to get a secured loan with your current bank, which will require that you put down some collateral for the loan, so the bank knows you have the money to pay them back.
You Can Get An Emergency Loan
If none of the other options work for you and you need money quickly, it might be time to look into emergency loans. Loans like these tend to have high interest rates but they are meant to last until your paycheck comes in or until you find another source of income to pay back the balance owed. Keep in mind that emergency loans are extremely risky because if one creditor decides that he needs his money now, then all your other creditors might do the same. You have to ask yourself if there is any other way for you to get the money quickly. If the answer is no, then an emergency loan might be your only option.
While the debt that caused your bad credit score might be impossible to pay in full at once, there are still ways that you can repair your damaged credit history to help you get back on track. Consider trying any of the options mentioned above and be sure to check your credit report regularly for any signs of improvement.