When trying to improve a low credit score, credit repair companies may seem appealing, but managing it yourself can save you money. These companies often charge high fees to dispute inaccurate negative entries on your credit report. Instead, you can take free steps to enhance your score.
This will help improve your financial standing and show lenders that you're a responsible business owner. Finally, be sure to keep track of your expenses and make sure that you're not overspending. This will help you stay within your budget and improve your chances of getting approved for loans in the future. Now let’s take a closer look at some of these tips to help repair your credit.
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How Are Credit Scores Calculated?
To effectively improve your credit score, it’s essential to understand how it’s calculated. Most lenders rely on your FICO® score for about 90% of their credit decisions. While other scoring models exist, they are similar enough to FICOs that the strategies for improvement apply broadly.
FICO considers five main factors in calculating your score:
Payment History:
This reflects your ability to repay borrowed money. Missed or late payments can lower your score, while consistent, on-time payments will boost it.
Amounts Owed:
This pertains to your credit utilization. Using all available credit, such as maxing out a credit card, can negatively impact your score. Aim to keep your utilization below 30%.
Length of Credit History:
A longer credit history indicates responsible borrowing over time, which can lead to a higher score.
Credit Mix:
A diverse range of credit types—like mortgages, auto loans, student loans, and credit cards—can positively affect your score.
New Credit:
Opening several new credit accounts in a short period can temporarily lower your score. Be strategic about when and what accounts you open.
Check Credit Report
The first and most important step is to get a copy of your credit report. A credit report gives you a snapshot of the overall health of your finances. Plus, you get a firm grasp on how much borrowing power you have. By reviewing your report, you can see all of your loans and balances, which helps with budgeting for repayment and/or reducing the amount you still owe. Even more importantly, you’ll find out if there are any errors in the report or any possible instances of identity theft (yes, it can happen to a business) that need to be reported.
Dispute Any Errors Found on Your Credit Report
If you're having trouble getting approved for a loan, or your credit score is low, it might be time to take a close examination of your credit report. This can be done by obtaining a copy from a credit reporting agency, like Experian, and having your credit reports reviewed by a credit counseling agency or a debt management service which can also dispute any errors on your report.
Either entity can help you fix any errors on your report and teach you how to improve your credit score. If you don't have any errors on your report, you can take other steps like paying the balances that are mentioned on the report. Either way, cleaning your credit report is a good way to start improving your financial situation.
Pay Bills on Time
Making your payments on time also boosts your credit standing. For one thing, you’re spending an additional amount on late fees which saves a lot of money. Plus, you’ll not only improve your credit record but also your relationship with vendors which leads to excellent trade references and even positive reviews. However, if you have difficulty paying your bills on time, reach out to your creditors and vendors right away. In that situation (as opposed to waiting), they may be more willing to negotiate better terms.
Reduce Your Business Debt with Our Debt Management Services
In some cases, you need an experienced attorney to renegotiate the terms of your loans, reduce your interest rates, or modify your terms with your current vendors. Likewise, a debt management service, like Business Debt Counsel, can help consolidate your debt to where you have one affordable payment per month that covers all your creditors. Another step toward repairing your credit can involve coming up with a settlement that you can afford and would suffice for meeting your obligations to your creditors. Or a debt management service can assist with commercial loan restructuring or even get you out of the bind of a merchant cash advance. Either way, you don’t have to clean your credit alone and hope for the best. There are licensed attorneys who are knowledgeable in such matters and can help save your credit standing.
Avoid New Credit
Another important tip to remember is that applying for new loans or business credit cards means more hard inquiries which automatically knocks down your business’s credit score. Furthermore, opening new accounts, especially multiple credit cards at once, makes you look like a risky customer who won’t be able to pay off a balance. This practice can adversely affect your trade references. Plus, you’ll find that having too many open accounts leads back to the same problem with debt and damaged credit history.
Why improving your credit score matters
Having a good credit score makes it easier to borrow money when you need it. That could mean getting a mortgage or car loan, taking out a personal loan to cover an emergency, and earning some cash back or travel rewards.
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Actively working on your credit score means you’ll have access to credit when you need it and at more affordable rates. Check out our guide to credit score ranges to understand what your current score means – and how improving your score might make future borrowing a little easier.
Case Study: John’s Credit Repair Journey
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John, a small business owner with a credit score of 580, faced issues due to late payments and errors on his credit report. He proactively disputed inaccuracies with a credit counseling agency, boosting his score by 30 points. By setting up automatic payments, negotiating better terms with vendors, and consolidating debt with Business Debt Counsel, he improved his credit utilization and reduced interest rates. After avoiding new credit applications, his score rose to 700 within a year, enabling him to secure a loan for business expansion and access favorable credit cards, demonstrating a successful self-managed credit repair journey.
Conclusion
To effectively repair your credit, there are several key steps to follow. First, maintain a clean credit history by not overusing your available credit, making timely bill payments, and steering clear of high-interest credit cards. Second, create a plan for managing your existing credit. This will help you avoid overspending and ensure you use any new credit responsibly.
Also, if you have questions about your credit report or wish to restructure your current loans, contact a debt management service, like Business Debt Counsel. Our professionals have years of experience in helping clients to repair their credit standing.
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FAQ
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1. How to repair your credit quickly?
To quickly improve your credit, use a reputable credit repair service, pay off outstanding debts, explore secured credit cards, become an authorized user, and stick to a budget. These steps can effectively enhance your credit standing.
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2. What brings your credit score up the fastest?
The fastest way to get a credit score boost is to lower the amount of revolving debt you're carrying. The percentage of credit you use against the amount of credit you have available is called your credit utilization rate.
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3. How long does credit repair take?
On average, credit repair takes about three to six months. Your score should gradually improve throughout the process each time a creditor agrees to make a change in your favor.
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