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How To Get Out of the Bad Credit Score Range

Moneymagpie Team 22nd Sep 2022 No Comments

Reading Time: 3 minutes

Having good credit is necessary for a lot of things in life such as buying a car, getting a loan, or becoming a first-time homeowner. This number is basically a history of how you’ve handled money, and it shows lenders how likely you are to pay back any loans you obtain. 


If you have a less-than-ideal credit score, the chances of you qualifying for any type of loan can be slim. That does not mean there is no chance of it ever improving, there are many ways in which you can increase it.

Thoroughly Review Your Credit Report


One of the most important things you can do when trying to get out of the subprime credit score range is to take the time to go over your report thoroughly. Every year, you can obtain a detailed accounting of your score by going to AnnualCreditReport.com. 


The categories you’ll see on your credit report will include identifying information about yourself, your accounts, inquiries, and public records about foreclosures and bankruptcies. It’s necessary to review each section very carefully to ensure all information is accurate. If you find something that does not look yours, you can dispute it to have it removed. Other things you want to look for are incorrect credit limits, accounts that you’ve closed but are still showing as open, incorrect dates, having one account listed multiple times, and accounts incorrectly showing as late or delinquent. 


Consider a Secure Loan or Credit Card


Secure loans are a good option for raising your credit score because lenders accept collateral to make sure you pay it back. Some people put things such as their car or house up to secure it. However, if they have trouble paying back that loan, the lender can put a lien on whatever they put down as collateral. Borrowers might find this route useful because they can get a relatively large amount of money, and as they pay it back, it looks good to the credit agencies.


A secured credit card is another option to boost your score. They work by allowing you to put down a security deposit, which is held by the company. If you put down a $200 deposit, you will likely have a $200 credit limit. As you make payments, you build trust with the company, and they might raise your credit limit. 


Pay Down Your Credit Cards


Credit cards can get people in trouble if they’re not careful. It becomes very easy to swipe it and tell yourself that you’re going to pay it back immediately, and then you may not end up sticking to that promise. You should always make every effort possible to pay off your credit cards each month. 


If you’ve gotten to the point where you cannot pay it off, don’t worry because there are a couple of options for you. One method is called the “snowball method,” and it’s when you work to pay off the smallest of your debts as quickly as you can. After that one is paid off, you then use that money towards the next smallest debt. Another helpful method is called the “avalanche method,” and that’s when you put your main focus on paying your debt that has the highest interest rate. 


Paying down debt helps to raise your credit score. Once they are paid off, try to keep your usage under 30% of your credit line.


Work Out a Plan for Accounts in Collections


If you have accounts on your credit report that are sitting in collections, it’s time to make a plan for getting them paid off. Whatever they may be, the first step is to contact the collection agency and just talk to them to see what you have to do. 


Some collection agencies will let you settle the debt if you make a one-time payment for a certain amount. If you’re not able to pay a large amount, you can try and work out a payment plan for them. 


Your credit score is very important, but not everyone has a perfect score. It can take a lot of work, but you can eventually watch yours go from very poor to excellent if you keep working at it.

DisclaimerMoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence 

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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