What would I do first if I had bad credit?
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John Ulzheimer is a well-known credit specialist with over 20 years of experience in the credit industry. He previously worked for Fair Isaac Corp., the company behind the FICO credit ratings, and Equifax, one of the three major credit bureaus.
Needless to say, he knows a lot about what it takes to repair bad credit – a score in the FICO range of 300 to 579 or a VantageScore range of 300 to 600.
In addition to not being eligible for the best credit cards, people with bad credit can also be at a disadvantage in other areas of their lives, including having difficulty renting an apartment, qualifying for a car loan, or finding it difficult to find a home. get an affordable mortgage.
Select spoke with Ulzheimer about the first step he would take to fix bad credit. Here is what he told us.
Start with the ‘triage’
“The first step in every credit rehabilitation journey would be the triage process,†says Ulzheimer. “That’s what I would do first.”
Global “triage†is a term most commonly used in a medical context. In a hospital, triage is a process used to determine which patients receive care first when resources are limited or the emergency room is full. Doctors and nurses prioritize those who are in more urgent need of medical attention and who would greatly benefit from immediate care. The goal here is to save the most lives.
Ulzheimer wants you to go through the same triage process to correct your bad credit: Find out what on your credit report contributes the most to your bad credit rating. “This is important because there are different ways to get a lower score and as such there are different ways to improve your credit,†he says.
You can retrieve your credit report for free from Experian, Equifax and TransUnion on a weekly basis at AnnualCreditReport.com.
How to check your FICO® Score for free
FICO credit scores are used in over 90% of loan decisions in the United States, which means it’s arguably the most important credit score to know.
You can access your free FICO credit score through your bank or your credit card issuer, such as American Express, Bank of America, or Citi. Online resources like Experian Boost â„¢ and Discover Credit Scorecard also offer free access to everyone, whether you are a cardholder or not.
How Looking At Your Credit Report Can Help Your Bad Credit
Your credit report serves as an overview of your overall financial health. By browsing it, you can find your personal information, current and historical credit accounts for the past seven to ten years (including their status, balances, and payment histories), inquiries, and public records.
Here’s how you can apply the Ulzheimer’s triage process when pulling your credit report:
There are five key factors that make up your credit score:
- Payment history
- Amounts due
- Length of credit history
- New credit requests
- Credit combination
You’ll want to see where you rank in each of these categories. For example, you might see on your credit report that you have a variety of credit products, like a credit card and student loans, so that you know your credit mix isn’t what you are looking for. delay.
Instead, your credit report shows that you haven’t paid your credit card bill on time every month. Since your payment history is the most important of all factors in determining your credit score, this is what you would like to focus on correcting as soon as possible to improve your bad credit.
“Triage will allow you to see anything negative on your credit reports,†says Ulzheimer. “It will also allow you to see what your scores look like before you start, and why they aren’t higher. Until you know these things, you’re just guessing what you need to do to improve your credit.”
When reviewing your credit report, also look for any inaccurate information. About a quarter of Americans have an error on their credit reports, which can lower your credit score and impact your chances of qualifying for new credit in the future.
Help you keep tabs on your credit reports by signing up for a credit monitoring service that alerts you in real time to any changes in your credit. Select Capital One’s CreditWise® and Experian Free Credit Monitoring as the two best services for consumers at zero cost.
At the end of the line
Your first step in fixing bad credit is knowing what makes it bad. To use Ulzheimer’s triage method, pull up your credit report to see which factors are contributing the most to your bad credit, and focus on those factors first.
Fixing bad credit often takes time. Overdue accounts (late payments) that you see stay on your credit report for up to seven years. Late payments also negatively impact your credit score as long as they stay on your report, but the good news is that their impact wanes over time.
Don’t despair though: there are steps you can take that will help you see an improvement in your credit score month over month, including paying on time, lowering your credit utilization rate, and reporting any problems. error in your report.
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Editorial note: The opinions, analyzes, criticisms or recommendations expressed in this article are those of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.