How to Fix a 579 Credit Score: 5 Credit-Boosting Tips

0
336
c2cbcde9302ac5fcad48eab294d91e44

Loans are an essential component of the modern-day financial toolbox. They allow us to purchase the cars, homes, and degrees we all seek without spending decades scrounging up the money ourselves. That said, loans aren’t guaranteed.

If you want a great loan, you need a great credit score. And that’s a problem for over half of Americans who have been turned away from loans because of bad credit. You may be one of them if you have a 579 credit score or below.

The good news is your credit score isn’t permanent. Let’s take a closer look at credit scores and how to improve them.

What is a 579 Credit Score?

Lenders use credit scores to determine how financially responsible their clients are. After all, they don’t want to give money to someone with a history of bankruptcy or deferred debt payments. And when lenders agree to dole out a loan, it will come with worse stipulations and higher interest rates to make up for non-paying borrowers in the same credit category. 

Credit scores run the gamut from 300 to 850. With such a large range, you might imagine 579 is a decent credit score. However, it’s the tail end of the “Very Poor” credit category that extends from 300 to 579.

Few banking institutions agree to do business with those in this category.

5 Credit-Boosting Tips

Regardless of your lending history, you can earn an exceptional credit score with the right strategies. Best of all, it doesn’t take long to repair the damage. Rebuilding bad credit takes about 7 to 10 years as previous infractions drop off your record.

For an in-depth look at improving your credit score, check out the article here. Otherwise, keep it simple with these tips and turn that 579 credit score into an 850.

1. Don’t Miss a Payment

At the end of the day, lenders want to know that their borrowers will pay them back. That’s why making timely payments is a major contributor to your overall credit score.

And it’s not just about debt payments related to loans, such as those from your credit card or college. If you miss a mortgage payment, that’ll end up on your credit history and damage your score.

The easiest way to ensure you pay your dues on time is to enroll in an automatic payment system. Almost all institutions offer this modern service. As your current payback history improves, the damage caused by missed payments will become less relevant.

Your credit score will increase as a result.

2. Lower Your Debt

Never use more than 30% of your existing credit line. For example, if your credit card has a maximum of $10,000, don’t exceed more than $3,000.

Why not? Your credit utilization ratio has a large impact on your overall credit score.

When you’re under 30% utilization, lenders see this as a sign that you’re managing your finances well. But things change if you start maxing out your credit, as this could indicate financial distress.

If you have a 579 credit score or lower, you’re probably battling with debt well above this ratio. Be patient and start paying more than the minimum every month. By funneling your extra savings into the highest interest loan, you’ll slowly lower your utilization.

3. Watch Your Credit Reports

Mistakes happen. Sometimes incorrect penalties appear in your credit history. This unjustly penalizes your credit score.

Thankfully, you have recourse. By law, you can receive a free credit report once a year. Always take advantage of this offer so you can not only look for credit errors but also signs of identity theft.

If you see any mistakes in your annual credit history, dispute them with the corresponding credit bureau. Most have online processes that make it easy. Removing these inaccuracies will boost credit scores right away.

4. Use a Secured Credit Card

With a 579 credit score or lower, you may not have access to credit cards from the major chains. Except, in reality, you do. You just don’t know it.

Major lenders are happy to offer secured credit cards even to those with terrible credit scores.

What’s a secured credit card? It’s like a traditional one, except you have to make a security deposit to open an account. These also tend to have significantly lower credit lines.

If you happen to miss a payment, the lender will use your deposit to pay for it. Of course, you should make sure you don’t miss a payment so you can continue to build good credit.

A secured credit card gives you a safe, viable option to build a positive credit history. Plus, by increasing your credit line, you’ll decrease your credit utilization ratio. It’s a win-win.

5. Try Different Types of Credit

Personal lines of credit impact about 10% of your credit score. By following the strategies listed above, you’re already on the path to success. But if you’re trying to do everything in your power to build credit, this is worth a look.

There are two types of credit: installment credit and revolving credit. Installment loans are static, like those for a car, house, or college. Revolving loans come from credit cards, as you choose how much you owe every month.

By maintaining both types of credit, you show lenders you can handle different types of loans. This makes them more likely to do business with you.

Fix Any Credit Score

Even if you spent decades struggling with debt, you can make a change for the better. These basic tips will turn your 579 credit score into an 850. Be patient, pay your bills on time, and watch your credit score rise.

It’s that simple.

Struggling with your personal finances? Search our website for more advice.