Credit Problems

Credit problems can make life pretty difficult. A low credit score can keep you from applying for credit cards, loans and mortgages. Credit problems can also make it hard to get an apartment or even a job. Perhaps the most difficult thing about a poor credit score is that it can seem impossible to fix, as credit problems in your past often prevent you from the getting the opportunity to show that you are creditworthy today.

3 Common Credit Problems & How to Fix Them

Problem 1: I have a late payment

If you only have one or two late payments on your credit report, it probably isn’t a big deal. Mistakes happen from time to time and sometimes things get missed or reported incorrectly despite someone’s best efforts. As long as you have a good credit history that spans many years, one or two late payments should only be like a small scratch on your car door. It’s annoying to look at, but in the big scheme of things, it really doesn’t change anything. However, if you drive around with a lot of scratches and dents in your car, people may get the impression that you are careless and may begin to ask questions. The same is true with your credit report; the more late payments that show up, the more likely your lender is to ask you what happened, and the more likely it is that your credit score will be impacted.

Problem 2:

1) I have high credit card balances or
2) I have some collections on my credit report

If you have had credit for a number of years and you always pay your bills on time, yet you have a low credit score, it may be because your credit card balances are too high. If any of your credit card balances are routinely over 75% of your credit limit, this is a red flag to the credit scoring system, and it will significantly lower your credit score because it is a sign that if your income is jeopardized, you would not have the money to pay off what you owe. You are then considered a greater risk to the credit card company. To have a great credit score, it is best to keep your balances below 50% of their limits, even when you’re collecting points. However, the very best thing is to pay off your cards every month and try not to carry a balance at all. If you have high credit card balances right now, try to get them paid down to below 75% of your credit limit. Once you do this, you should see your credit score improve. If you are struggling to do this on your own, contact a Credit Counsellor and ask them for some guidance.

Problem 3: I have a lot of late payments on my credit report

If you have a lot of late or missed payments on your credit report, there is no legitimate way that you can fix your credit score quickly. The only way to repair the damage that lots of late payments causes is to demonstrate over the next several years that you pay your debts on time, as agreed. As time marches on and you consistently pay on time, your credit score will improve. The record of each late payment will be removed from your credit report 6 – 7 years from the date of the late payment. So in time, all late payments will be removed from your credit report and you will have a fantastic credit score if you continue to make your payments on time. The only way that you can possibly accelerate this process is if you work with a credit counselling agency to pay off your debts.