Bad credit happens to good people every day. Who hasn’t—at least once or twice—bit off a little more than they can chew financially? Sometimes events out of our control, such as medical bills or natural disasters, can deplete life savings and run up debt, even if you are a conservative borrower typically.
It can take a long time to rebuild your credit, but USALLIANCE is here to help with access to knowledgeable financial advisors and great products such as USALLIANCE Credit-Builder Loans. Read on to find out more about your credit score and why it’s important, and to learn some simple steps you can take to rebuild your credit if it’s seen better days.
Perhaps you are in the habit of paying bills after the due date. It’s just a small late fee, right? Unfortunately, the penalty for overdue payments extends beyond a few dollars and can affect your ability to qualify for a car loan, a cellphone contract, or may increase your insurance premiums. You might even be denied a job because of bad credit, especially if that job involves handling money.
Looking for a path to better financial freedom? Visit USALLIANCE’s Live Life Fully Foundation, a not-for-profit organization providing financial education, opportunity, and relief to those looking to rebuild their financial future.
That’s because late and missing payments also affect your credit score. Your credit score is a number that lenders use to determine whether you are a safe bet financially. Lenders use your credit report, which contains your credit history, to determine your credit score. Credit scores can range from 300–800. When you apply for a loan or a credit card, your score is used to determine whether or not you qualify. Utility companies, employers, landlords, car dealers—they all evaluate how risky it will be to do business with you by checking your credit.
Credit scores are maintained by several agencies that use models to score credit; the most popular are FICO and VantageScore. You will also hear of credit bureaus that collect and report financial agency scores, such as Experian, Equifax, and TransUnion. The factors that determine your credit score include payment history, amounts owed, length of credit history, credit mix, and new credit, for example.
Lenders, employers, and insurers will check your credit score with the bureaus that maintain credit information, such as Equifax. The average American credit score is in the ‘good’ range, according to Experian. Wondering how your credit matches up? Check your score against the Experian FICO score credit report card:
| FICO Score | Grade | Percentage of Americans |
| 300–579 | Very Poor | 16 percent |
| 580–669 | Fair | 17 percent |
| 670–739 | Good | 21 percent |
| 740–799 | Very Good | 25 percent |
| 800–850 | Exceptional | 21 percent |
Bad credit takes a while to fix, but it doesn’t have to be a life-long curse, following you around from loan to job to car insurance application. There are many ways to start repairing your creditworthiness, and you don’t have to pay anyone to fix it for you—pro tip: most of those services are scams taking actions on your behalf that you can do by yourself with a bit of focus and responsibility. Let’s take a look at four ways you can improve your credit.
The first step is to assess the damage. You may be better off than you thought! You can ask a USALLIANCE representative to help you figure out your credit score, or you can visit annualcreditreport.com to do it yourself. In addition to finding your score, you should review your credit report for any errors, overlooked payments, or even identity theft. Your USALLIANCE representative can help you spot any issues if you are having trouble reviewing your self-service report.
It may sound obvious, but make sure you pay off your outstanding bills and continue to pay your current bills on time. You want to see those “delinquent” notifications on your credit report move to the “paid” column, and all that takes—to start—is getting that minimum payment in for each outstanding debt. Of course, minimum payments still accrue interest and won’t ultimately solve your problem, but in the eyes of the credit bureaus, there is a big difference between paying and not.
If you are making enough money to build a small savings—do it! Having an emergency fund for when the windshield cracks or to pay off those Christmas presents can help keep you from getting into more trouble with the credit bureaus. Building up a few months of take-home pay is a great strategy when you can do it, as well, especially if you worry about job security. However, we can’t always make enough money to save, so budgeting what you do spend—and keeping an eye on your indulgences!—will help you stay conscious of what you can spend each month.
Using your credit cards may sound like a strange way to improve your credit score however, there are benefits! Your credit utilization ratio is an important factor in calculating your overall score. Credit Card companies calculate credit utilization by finding the percentage of credit you have used in relation to your total credit limit for each card. They then report this to Credit Bureaus, which directly impacts your score. This accounts for approximately 30% of your overall credit score. Instead of letting your unused credit cards reach an inactive status, make one small purchase on your cards and pay it off at the end of each month. This will lower your credit utilization ratio while keeping it above 0% across your cards. By having a low credit utilization score, you should see a bump in your credit!
A credit-builder loan is designed to help people with bad credit get on the road to financial recovery by improving their credit profile. USALLIANCE offers a credit-builder loan program that is easy to use, with competitive rates and personalized term and loan amount options. Here’s how it works:
Note—this is the opposite of a traditional loan, where you get the money upfront because your goal is to build credit, not fund a purchase. Once you are paid off, you get your funds—minus the interest—back. Think of a credit-builder loan as a deposit into a savings account for later use. If you have enough money to seed the loan and enough time to pay and wait to get it back, your reward will be an improved credit score.
Learn more about USALLIANCE’s Credit-Builder Loan program.
Let’s face it, not everyone receives a proper financial education when they are young. If no one taught you the importance of paying off bills on time or how to know if you can afford a purchase or a loan, then you might end up learning the hard way. Unfortunately, it’s easier to start from scratch when it comes to money than it is to rebuild trust in the eyes of lenders.
But that’s OK! USALLIANCE is here to help with advice and products that will help you regain control of your credit score for good. Hey, it’s been a tough couple of years for everyone. If you are looking for an inclusive, equitable, and community-based path to improving your financial health, visit USALLIANCE-founded Live Life Fully Foundations for opportunities and relief options.
Reach out today to learn more about how USALLIANCE can help you rebuild your credit and find financial freedom.