Most of us don’t live our daily lives considering the pros and cons of good credit. It isn’t something that crops up that often, but when it does, it can make a pretty significant difference. This is particularly true for instances where you may want to take out a loan or apply for a credit card.
In this article, we discuss the issue of credit and offer recommendations on the best tools that can help you rebuild a damaged credit score.
- 1 The Importance of Good Credit
- 2 What Can Cause Bad Credit?
- 3 Credit Repair Resources
- 3.1 Websites
- 3.2 Annuity.org
- 3.3 Books
- 3.4 Calculators
The Importance of Good Credit
If you’re unsure of what your credit score precisely is, then take a look at this resource for a more in-depth breakdown. The importance of being aware of your credit score and acting accordingly really can’t be overstated. You can request a full report of your personal credit score for free today via this link.
If you still aren’t convinced that good credit is important, let us break down some of the ways it can directly benefit you.
- Lower Interest Rates: Often, the interest rates attached to credit cards and loans are directly linked to your credit score. The worse your score, the more interest you’re going to accrue. This can be costly but can be avoided with good credit practice. If you’ve made mistakes in the past with your credit, then this is where credit repair can prove invaluable.
- Higher Borrowing Limits: Higher borrowing amounts open up new opportunities for larger loans that may help with the purchase of a home or car. Investing in a good credit score is really investing in your future.
- Easier Approval for Rentals: If you’re looking to rent a property then landlords will often look to your credit score for an indication of your responsibility with money and what kind of tenant you’re going to be.
These are just some of the many benefits a good credit score can provide you, but the key is to stay mindful of your spending habits and how that may reflect on record. Understanding your credit score is the first step. Next, you need to actively avoid some of the worst habits that can contribute to a negative credit score.
What Can Cause Bad Credit?
Your credit score is a three-digit number that is calculated via your credit report. It’s usually scored between 300-850, and the higher you are in that rating, the better your score is. According to Wells Fargo, the following variables are calculated to provide your credit score:
- 35% is based on your payment history
- 30% is based on current debts
- 15% is determined by credit history
- 10% is allotted to new credit applications
- 10% takes into account types of current credit
The biggest misconception regarding these scores is that credit cards and loans are the enemies. In actuality, if you’re on time with your payments, then they can be a great boost to your score. Just make sure you are financially able to keep up with loan repayments/credit card rates before committing, or you’ll only sabotage your score.
But what do you do if you’ve made mistakes in the past and you need to up your score now? Well, that’s where credit repair resources come in handy.
Credit Repair Resources
To those of us with bad scores, a repair service can seem like a Godsend, but it’s important to be aware that these companies aren’t all miracle workers. Some repair companies take advantage of desperate individuals who feel cornered by their poor scores. Don’t be lured into making the same mistake. Read our guide on credit repair company reviews first before signing up for a service.
Though your credit score can be improved through various techniques, nothing can be wiped entirely from your record. Be wary of companies that boast this, as they aren’t being truthful. For further information on fixing your rating, read this guide from the Federal Trade Commission.
Now you know what you’re looking for, we’ve compiled a list of various repair resources that may prove helpful to you. Each service provides different solutions based on your circumstance, so consider your goals before moving forward with a service.
An enormous source that breaks down all of your credit information, including explaining your score report and estimating how much you should expect to pay when applying for a loan with bad credit. It also provides you with estimates on how much better your current interests could be if you improved your score. A handy tool when trying to understand the value of good credit.
An app and a website, Mint allows you to track your finances so you can see which specific elements of your spending are negatively impacting your score. It provides a variety of handy features including the ability to move money between accounts and pay bills within the app.
You can also read our guide to cheap credit repair options too.
Ready For Zero
As its name suggests, Ready For Zero is an online service that endeavors to help you pay off your debts in full. As part of your score is calculated directly from your outstanding debts, this is a great way to improve your overall rating. The site is built on the merits of realistic payments and advice, so it’s appropriate for people of all financial backgrounds.
Potentially the service with the best name at least, Nerd Wallet provides you with all the information you need when deciding which credit card company to sign up for or which loan will harm your score the least. This covers student loans, mortgages, personal loans, and more. They provide expert advice based entirely on your unique circumstance, which makes their service invaluable.
Annuity.org provides two fantastic resources on financial literacy:
We aren’t trying to insult you with this resource, it’s just a genuinely helpful book for getting a thorough understanding on how the rating system works and how you can act to improve it. The popularity of the ‘For Dummies’ series speaks to the value of this product.
Another easy-to-understand book on credit repair, this resource won’t include endless pages of complicated information. Instead, it will walk you through step by step on how to improve your score in a meaningful way. It’s the perfect companion for those new to the repair process.
An app available on the Google Play store, this planner and calculator allows you to track up to five separate debts at a time to ensure you’re on track with payments. You can’t erase debt with a snap of your fingers, but you can make sure you never miss a payment again. Over an extended period of time, your good behavior will be rewarded with a much-improved credit score.
By combining several important factors (including outgoing bills, your household income, and property down payments) the house affordability calculator allows you to get a better hold of your finances. Prolonged organization of how much money is coming into and out of your house will yield great results for your credit score as you stay on top of your outgoings.
This calculator is especially handy if you have outstanding loans that feel so large you’ll never be able to pay them back. To ease that anxiety, the amortization schedule calculator breaks your debt up so you can see how much you need to pay over a specific period of time. This helps break up even the biggest of debts into manageable pieces.
Matt is the founder of CreditInformative.com and holds a Bachelor of Commerce (BCom) with a major in Finance and Marketing and a Bachelor of Arts (BA) with a major in Economics and History. Matt’s advice has been featured on Business Insider, Fox Business, Newsday, Money Under 30 and many other publications.