A FICO credit score ranges from 300 to 850 points. A score of 800 to 850 is the criteria for having an excellent score, 740 to 799 is considered very good, 670 to 739 is considered good credit, and 580 to 669 is considered fair credit. Poor credit, as defined by FICO, is a credit score below 580.
Poor credit can happen for a number of reasons including failing to pay your bills on time, having a high debt, filing for bankruptcy, defaulting on loans, and charge-offs. Having poor credit can run you a number of problems including having difficulty obtaining loans and opening credit cards, increasing your interest rates, having problems finding housing, increasing the cost of insurance, difficulty buying a car, and even losing job opportunities. In other words, having poor credit makes it difficult to survive.
What is credit repair? What determines my credit score?
Credit repair is the process of improving poor credit. This can include fighting discrepancies and mistakes with credit agencies and bettering the five categories that make up your credit score.
35% of your credit is determined by your payment history. This looks at things like credit cards, loans, installment loans, mortgages, and retail accounts to see if you are reliable and pay your bills on time.
30% of your FICO score is for the amounts owed. This looks at the amount you owe on your accounts, how many of your accounts have balances, the amount you owe on installment loans compared to the original loan amount, and the percentage of available credit on all of your accounts.
15% of your credit is determined by the length of your credit history. This is the amount of time you have had credit accounts, how old each is, and how long it has been since you last used the account.
10% of your score is your credit mix. This is the variety of your credit accounts, it is good to have a mix of types of lines of credit.
The final 10% of your score is determined by your new credit. This includes the amount of new accounts that you have, how long it has been since you last opened an account, and the amount of recent credit inquiries you have on your record.
What is a credit repair company and what do they do?
In essence, a credit repair company disputes inaccurate and incorrect information on your credit report. This can improve your credit if there is inaccurate information that is hurting your credit. This can also be done by the individual, but the work is tedious and time consuming. A credit repair company is not allowed to do anything that you cannot do
What can I do to better my credit score?
Aside from using a credit repair company (or fighting discrepancies yourself), there are a number of things that you can do to improve your credit score. It is important to better the categories that have the greatest impact on your credit. Make sure that you pay your bills on time and try to eliminate your credit card debt as much as possible.
The next priority should be the smaller categories. Do not ignore them because they still make up a considerable chunk of your credit. Do not close credit accounts if you have a balance of other accounts. Try to limit hard inquires on your credit account like applying for new credit cards. You should still watch your credit and monitor it regularly.
Bad credit can be bad, but there are ways to pull yourself out of it. We hope that this information can help you on your journey to better credit.