3 Tell-tale Signs You Need to Fix Your Credit Rating

While it takes very little to destroy your credit, you will have to apply dedicated efforts to fix a credit rating. It is common for borrowers to make the mistake of simply ignoring their credit instead of monitoring and understanding their score. You should be paying particularly close attention to your credit score if any of the following three scenarios is true. If even one is, then you need to take immediate steps to increase your credit score to avoid penalties in the future.

#1 Your Score Lower than 700

Check your credit score. You can do this by going directly to one of the three credit bureaus: Experian, Equifax or TransUnion. Each will offer you the opportunity to check your credit for a fee. You may also use a third party service that compiles reports from all credit bureaus at once. You should note: these third party services do actually cost money even though they often advertise free reports. The low cost is typically worth the effort, though, so you can effectively monitor your score.

If your score is under 700, then you are in a medium to high risk category. This is an immediate sign you should take steps to fix your credit now. Aim for a score at least over 700; a score over 730 is ideal and will qualify you for most credit opportunities and low interest rates in the future.

#2 You have been Denied

The minute a potential lender tells you "no," you need to turn your eyes to your credit report. Look for the red flag that sent the lender away from potentially working with you. If the red flag was a late payment, high credit card balances or a previous default, take steps to immediately work in the opposite direction. Being denied one loan is a sign you may be denied other loans in the future.

Where possible, ask the potential lender why you were turned down. You may be able to resolve the particular problem you have on your credit score by filing a dispute or paying off a bad debt. Knowing the particulars of the reasons behind the denial makes it possible for you to act swiftly to prevent further denials in the future.

#3 Your Lenders have Increased Rates

If you have adjustable rate loans, pay particular attention to the rates on these. You will receive notices in the mail when your rates have gone up. Instead of ignoring these notices, contact the lender and ask for the reason behind the rate increase. The lender will typically be able to give you a concrete reason they raised your rates. In some cases, market factors beyond your control will be the cause of the problem. However, in some cases your own actions will be the source of the more expensive financing. 

Once your rate has been raised on your credit line, there is a low chance it will be lowered again in the future. However, fixing your credit rating now will at least prevent similar consequences on other loans or lines of credit.

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