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Our FICO scores impact our ability to borrow both as a business and as individuals.  Traditional banks use them as the basis of many of their lending decisions, and a bad score can mean rejection before the ink has dried on the application.  This is the reason so many of us worry about our scores. If you’ve had issues, are you screwed?  The answer depends on each individual, but in many cases, with time and work, there is hope through a few simple steps.

Get your full credit report

The first step to fixing a bad score is knowing what that score is. The easiest way to do this is through a consumer credit reporting company like Experian. These companies monitor and report scores back to people to ensure that their identities, credit, and financial information are secure.

Contrary to popular belief checking your score will not negatively impact a score, as long as it done personally. These are considered a soft inquiry, which doesn’t affect credit scores. Checking your score while applying for credit can have an impact on a score, and is considered a hard inquiry. This is why it is better to check a score before making an attempt at acquiring credit.

Find & resolve inaccuracies

A bad score is often caused by inaccuracies. These simple mistakes, such as an incorrect address, a misspelled name, or wrong birthdate, can be indicative of identity theft. Finding these mistakes, and evidence of theft can help solve a bad score but do take time to resolve.

While it is possible to dispute inaccuracies online they are often denied. In order to ensure a response from the credit reporting company print out the report, highlight the inaccuracies, and write a series of simple letters with the collected evidence to the reporting agency.

In the worst case scenario where they continue to deny the reported inaccuracies, you can then find legal aid from someone who specializes in Fair Credit Reporting Act cases. The easiest way to find one is on the National Association of Consumer Advocates website.

Balancing credit usage

The first inclination once a bad score is discovered might be to limit the items that impact credit scores, most notably credit cards. However, closing all unused cards is a bad idea. The general rule is to have more credit available than is actually used.  So, keep a couple of cards open. 

It is also important to have a few different types of credit, not just credit cards.  Mortgages and private loans affect credit scores just as much as cards do, and are less likely to be affected by identity theft.  In addition, having a variety of credit types reporting will help to improve your overall score.

Pay on time, every time

Credit scores change based on how we treat the credit we have taken out. If there is a constant case of neglect towards payments the score will almost always be bad. Paying at least the minimum ensures that there is a history of positive reports.  6 months of on time, minimum payments can have an immediate impact on a report, make a noticeable difference in your overall score.

Repeat every six months.

It may seem that once a successful score is achieved that the challenge is over. But, much like physical health, credit needs to be monitored. It is not a once and done job.  Your credit report is always evolving, changing with each major decision you make in life. The choice to buy a new car, a home, or to go on a trip can make or break a credit score. Identity theft is always a threat, and even the smallest credit card purchases can pile up. So, in order to keep a good credit score, repeat these steps and once every six months request an updated credit score.

But what if you need financing now, despite a lower score?

While loan officers at traditional banks are often handcuffed with stringent credit requirements, not all lenders are limited by these same restrictions.  Different lenders, as well as different types of financing, will expect different minimum credit scores.  And some types of financing won’t even check your credit score at all.  So if you need financing now despite having a lower credit score, our team can help.  Give us a call and we can talk through immediate financing options, as well as steps to help improve your credit over the long term.