Turning Poor Credit Scores Around is Easier than You Think

The global economy is a credit-driven system, so much so that the average debt to income ratio is surprisingly higher than most people think. According to official statistics, the total American household debt in 2018 was $13.21 trillion. When that debt is broken down by age group, some surprising numbers appear.

The under 35 age group has an average debt of $67,400, while the 35-44 age group has an average debt of $133,100, and the 45-54 age group has an average debt of $134,600.The 55-64 age group has an average debt of $108,300. The numbers significantly taper off from there as major expenses like homes, business loans, education, and vehicles are generally paid off, leaving a smaller debt burden on people aged 65+.

credit score

The numbers point to an interesting reality:Debt accumulates over time, reaching its apex when people purchase their own homes, vehicles, and owe a substantial amount of money on student loans, and credit card debt. It’s at this juncture that many folks tend to get saddled with the ignominy of a bad credit score. When expenses start racking up and there just isn’t enough income to go around, debt-to-income ratios start increasing.

The primary benefactor in these instances is the piece of plastic we call a credit card. Unfortunately, credit cards are way too convenient to use and the APRs are exceedingly high. As debts and interest repayments pile up on credit cards, the amount of available credit decreases, and the debt burden increases. This is a surefire way to drive down your credit score. What options are available to reverse this pattern?

Before we go any further, the most important thing you can do right now is to request a free copy of your credit report. In the US, this service is readily available to every single person. You are entitled to a free credit report from each of the major credit reporting agencies in the country. These include TransUnion, Experian, and Equifax.

Many people apply for all three at once. This is your starting point when you set about repairing your credit score. If you notice any anomalies, inaccuracies, or blatant errors, report them immediately. You can read more here about what tips, techniques, and strategies you can implement vis-à-vis credit repair services.

Good Credit Scores & Bad Credit Scores – Where Are You on the Totem Pole?

First of all, it’s important to understand precisely what constitutes a bad credit score. Debt is essential in a modern-day economy. It allows people to make purchases and payments with money that may not be readily available in the present moment. A lender advances funds to a borrower for a fee. At the end of the month, those fees are due. Provided the debt-to-income ratio remains in check, there is nothing to worry about.

When expenses become overwhelming, an imbalance occurs. According to Experian, which uses the FICO® Score system between 300 – 850 for credit scores, anything under 669 is regarded as fair or bad. The stats reflect the following credit scores, ratings, and percentage of credit cardholders in the US according to these categories:

  • 800 – 850 – exceptional credit score rating – 20% of people
  • 740 – 799 – very good credit score rating – 25% of people
  • 670 – 739 – good credit score rating – 21% of people
  • 580 – 669 – fair credit score rating – 18% of people
  • 300 – 579 – very poor credit score rating – 16% of people

What Type of Credit Repair Options Can You Do on Your Own?

Different ratings agencies have different ranges, but the bottom rungs are always occupied by people with bad credit scores. Whether it’s VantageScore or FICO® Score systems being used, bad credit scores are often viewed unfavorably by traditional lenders like Main Street banks and credit bureaus.

However, online lenders and bad credit loan providers have moved in to cater expressly to this market of consumers. Common sense practices, and simple accounting can turn a bad credit score around in double-quick time. The following tips can be implemented on day one, with an eye to improving your credit score in the future.

  • Take a look at all of your debt obligations. Debt is not created equally. High-interest rate debt often warrants urgent attention. The less money you spend on interest, the more you can spend on repaying the principal of the debt. Debt obligations should always be focused on repaying high-interest rate debt first, and low-interest rate debt last.
  • Allow your credit cards to cool off. Some people quite literally put their credit cards on ice in the freezer, cutting debt-fuelled expenditure immediately, and paying down the cards until they are at reasonable levels. This extreme strategy works with some people, but certainly not with everyone.
  • Consider debt consolidation as a viable strategy to reducing your overall debt burden, by taking out a single loan to repay all of your debts at a lower interest rate than you are currently paying. Be advised that it’s important to carefully read the T&C of debt consolidation loans in respect ofinterest repayments, pre-payment penalties, and terms.
  • If you have overdue bills, pay them. Don’t let them sit and accumulate late charges, and fees. These could lead to liens or judgments against you. That will seriously impact your credit score.

Approaching Credit Repair Professionals to Restore Your Credit

Anyone who is serious about keeping their credit score in check may wish to consider the services of professional credit repair specialists. It is a costly option to pursue, but with the right credit repair professional service you will probably see an improvement in your credit score. Be wary of exaggerated claims of excellent credit scores within 30 days, or no more debt if you do this and that. The integrity, professionalism, and efficacy of credit repair specialists varies widely. It’s important to conduct the necessary research before you give carte blanche to a third party to negotiate debt on your behalf.

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