The answer to this question isn’t a simple ‘yes’ or ‘no.’ Many times we will see people that have good incomes but have not paid the proper attention to how they are handling their credit accounts. It may not seem like a big deal to be late a few days here, a few days there, but after time this negative information adds up and drags your score down.
Think of it like a neutrally buoyant object floating on the ocean’s surface. The more negative things on your report, the more weight you add, eventually causing you to sink, sometimes drastically.
So what can you do if you find yourself in this situation?
There are many things, and plenty of companies and/or people will give you their advice. But be careful when dealing with credit repair companies (as a disclaimer, BoostCredit101 is not one of these). Many of them are frankly disreputable and will take your money and do things you could do on your own, possibly even leaving you in a worse position than you were before.
To help uncloak the process, a little background. Your credit score uses historical data from your credit report (CR) to predict your future risk of default. The data on this report is usually an accurate reflection of your financial life. Your financial life is indicative of the rest of your life. How you do anything, is how you do everything. So if you are having rough times, it will reflect on your CR.
If you have a low score, I’m guessing you have some charge-offs, unpaid and/or seriously delinquent accounts on your CR. So if this is the case and the damage has already occurred, the first thing you do is review your reports and make sure the information is accurate and not out of date (go to annualcreditreport(dot)com, you can print all three bureaus for free once a year). If anything is inaccurate or older than seven years old, you can dispute it (Bankruptcy can take up to ten years).
Next, pay the balances on any collection or charged-off accounts. This will not make a significant immediate improvement, but anyone looking to give you credit will see that you paid what you owed, even if it was late. Next, and this is big, pay down your credit card balances so they are between 30 and 50 percent of your total credit limit. Even better, pay them in full, and pay them in full monthly thereafter. A credit card is a financial tool, not a license to buy something you could not afford if you didn’t borrow someone else’s money.
To help build a positive history, you may consider opening new credit accounts in different categories. Showing that you are able to balance fixed payments (installment credit such as personal, auto, even furniture loans) and credit card accounts is a plus. You may also consider a secured card (make sure it reports to the credit bureaus). And finally, only apply for credit if you need it and can afford the new payments.
This lays the foundation for future positive credit scores. And if you need an immediate boost, or looking to get into that next great bracket where you can qualify for the best loan rates out there, look at any of our numerous boost lines to get you over that hump.
With all of this information, in time you will see your reports and your scores make their way up and eventually break the surface into the light of superior credit.