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Have bad credit? Here’s what you can do to help fix it

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Toxic credit is a big stepping stone to financial struggles. Here’s how to fight the good fight and repair bad credit – before it damages your finances. (iStock)

It’s no secret that having bad credit can severely hinder one’s financial experience. The worse the credit score, the worse the experience.

“Bad credit is generally any score under 650, though this can certainly fluctuate depending on credit usage,” said Alex Miller, founder of UpgradedPoints.com, a digital platform that offers financial advice to travelers. “Specifically, bad credit can lead to higher interest rates, less money offered on loans, denial of credit cards, and a more difficult time to get everyday transactions done, such as buying a car, getting a mortgage, or other routine tasks. It can even lead to job denial for jobs that check credit history.”

However, that doesn’t need to be the case, not when fixing bad credit is a highly doable proposition.

“There are no shortcuts to fixing a bad credit score, but like many things it can be done with hard work and diligence,” said Matthew Gaffey, certified financial planner at Corbett Road Wealth Management, in McLean, Va.

If improving your credit score is your objective, consider following these steps:

  1. Check your credit score
  2. Pay off any debts in collection status
  3. Consolidate your debt
  4. Get under 30% credit utilization
  5. Use a credit monitoring tool
  6. Dispute an error on your credit report




Not sure where you fit on the credit score spectrum? Then you should start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.

WHAT IS THE BEST WAY TO TACKLE CREDIT CARD DEBT?

1. Check your credit score

The first step toward fixing bad credit is to visit annualcreditreport.com where you can get a free credit report. “The reports are updated weekly, and are for free,” said Clint Lotz, president of TrackStar.ai, a predictive API for the financial sector.

2. Pay off any debts in collection status

Financial consumers looking to repair their credit should enter repayment mode. Debts that are in collections should be a priority, as they make a difference on credit reports.

“We all know that a collection is a bad thing, but if someone with bad credit were to go payoff that collection today and it’s from an emergency room visit three years ago, the ‘date of last activity’ on the credit report will be updated from three years ago to today,” Lotz said. “This move is all but guaranteed to bring the credit score down substantially.”

3. Consolidate your debt

Another step to start improving your credit score is to consolidate some or all of your debt. “Many banks, credit card companies, and other lenders would love for you to consolidate their debt with their particular company and likely will give you an incentive to do so,” Gaffey said. “For example, some will provide you with 0% interest on that debt for a specific period of time (i.e. for six, 12, or 18 months).”



Visiting Credible can help you compare debt consolidation options to find the best personal loan rates for you, based on your credit score and credit history.

CREDIT CARD REFINANCING VS. DEBT CONSOLIDATION: WHAT’S THE DIFFERENCE

4. Get under 30% credit utilization

If a consumer has lines of credit where more than 30% of the limit is being used, which is called credit utilization, start paying it down as fast as possible. “Credit utilization accounts for 30% of a credit score and can be one of the quickest ways to raise a credit score,” Lotz said.

5. Use a credit monitoring tool

The benefits of using a credit monitoring tool are numerous.

“First, they provide constant monitoring of all three credit reports, with real-term alerts and notifications of any changes,” said Nicole Kubin, founder of Strategic Divorce Advisory, a financial services firm based in New York. “A credit monitoring firm can flag identity theft issues and may even be able to offer identity insurance to cover expenses required to restore your identity. The reports are particularly useful if you are trying to improve your credit score as they will demonstrate the direct impact of a certain action or inaction on your credit score.”

Consumers should know that some credit monitoring firms charge a monthly fee ($10 to $12 is a common fee range). And some providers, like the main credit scoring agencies and some lenders (credit card providers, in particular), will offer credit monitoring for free.



If you’re considering credit monitoring, check out Credible. With a credit monitoring service, you can get instant alerts on late payments, fraudulent activities, credit score changes and more. Check out some of Credible’s partners here.

AVERAGE FICO SCORES HIT RECORD HIGHS — 5 THINGS YOU SHOULD DO

6. Dispute an error on your credit report

Disputing and fixing errors on your credit report can also help financial consumers to boost their credit scores.
“In order to check the accuracy of your credit reports, start by obtaining copies of your credit reports from all three credit bureaus: Experian, TransUnion, and Equifax,” said Kubin. “It will be even easier to compile this information if you use a credit monitoring tool.”

If you find an error on your credit report, contact the credit reporting company by certified mail or online via the firm’s website or mobile app.

“Additionally, if you find any items or accounts in your credit report that you do not remember opening, you might have been the victim of identity theft. Immediately notify your bank and credit card companies, and all lenders,” Kubin added.




Your credit score is typically one of the first things lenders look at when considering you for a loan. To ensure you’re staying up-to-date with your credit status, enroll in a credit monitoring service. Credible can help you get started.

HOW STUDENT LOANS CAN AFFECT YOUR CREDIT SCORE

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Bad Credit

Is There a Difference Between No Credit and Bad Credit?

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The short answer is yes, and understanding the difference could be instrumental in getting better credit.

No credit and bad credit often get grouped together. It’s understandable why, as they both sound similar enough. And if you have either, the next step forward is to focus on improving your credit.

The two situations aren’t the same, though. It’s important to know the difference, because the right way to build your credit often depends on whether you have no credit history or bad credit.

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The difference between no credit and bad credit

Having no credit means that there’s not enough information on your credit file to calculate a credit score for you. It’s also known as being credit invisible. Sadly, this is an issue that affects millions of Americans.

There aren’t any problems on your credit file; the credit bureaus just don’t have enough data on you. That means when a lender or any other third party checks your credit, there’s nothing to go on.

Meanwhile, “bad credit” is a common term used to describe a low credit score. That low score is because of negative items on your credit file, such as not paying your credit card bill.

When you have no credit, the solution is to build your credit. When you have a low credit score, the solution is to rebuild your credit. Now, let’s look at how you can do each one.

How to build credit for the first time

Here’s the simplest way to build credit:

  • Open a credit card.
  • Use the credit card for at least one purchase per month.
  • Always pay your credit card bill on time and in full.

It’s that easy; that’s all you need to do to get a good credit score. When you use a credit card and pay the bill on time, you establish a positive payment history. That’s the biggest credit scoring criteria.

The tricky part when you have no credit is finding a credit card you can qualify for. Secured credit cards are one of the most common options for consumers in this situation. You pay a security deposit for this type of card, so it’s possible to open a secured card even if you have no credit.

If you’re in college, credit cards for students are available. These are often an option for applicants without any credit history.

How to rebuild a low credit score

It’s a little more complicated to rebuild your credit. First, you need to find out what negative items are affecting your credit score. Here’s how to start:

  • Use an online credit score tool to check your score and learn about any items damaging your credit. If you have a credit card, there may be a credit score tool in your online account. If not, there are plenty of free ways to get your credit score.
  • Request your credit report from the three consumer credit bureaus (Equifax, Experian, and TransUnion). You can pull a free annual credit report from each bureau, and through April 2022, you can get free weekly credit reports. Your credit report will show you exactly what’s affecting your credit.

Once you know what’s affecting your credit, you can work on correcting it. Below are a few of the most common issues and how to fix them.

Problems with your payment history

This includes anything related to not paying a bill on time, from late payments to having accounts go to collections.

The first step is catching up on your payments. If you can’t pay in full, contact your creditors and see if you can set up a payment plan with them. They may be willing to work with you if that means you’ll be making regular payments.

Next is rebuilding your payment history. The easiest option is to use a credit card at least once per month and pay in full by the due date. Why do you need to use a credit card? Credit card companies report on-time payments to the credit bureaus, which helps your credit score. With other types of bills, your on-time payments typically don’t get reported to the credit bureaus. That means you may not be able to improve your payment history with rent, utilities, or other monthly bills.

If you already have credit cards, you can continue using them to rebuild your payment history. If you don’t, look for secured credit cards and apply for one you like.

Using too much of your credit

A big factor in your credit score is your credit utilization ratio — your credit card balances divided by your credit limits. If this number gets too high, it can lower your credit score. The standard recommendation is a credit utilization ratio of under 30%.

Let’s say you have one credit card with a $4,000 balance and a $5,000 credit limit. That would put your credit utilization at 80% ($4,000 divided by $5,000 is 80%), a very high number that would decrease your credit score.

Fortunately, only your current credit utilization matters. Once you pay down your credit card balance, your credit score will bounce back.

Errors on your credit history

A low credit score may be due to an error and not any action on your part. This is why it’s so important to pull your credit reports from each credit bureau. By reviewing those, you can see if there are any mistakes.

If there are errors on your credit report, you can go to the credit bureau’s website to dispute them online and get them removed.

A low credit score and a nonexistent credit score are both things you can change. After you determine exactly what the issue is, you’ll be able to choose the best solution to fix it.

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‘There is no new normal’: Worcester small business owner pivoted during COVID-19 and expects only more change after pandemic

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It took about eight minutes for the bank to reject Natalie Rodriguez’s application for a loan through the Small Business Administration.

Rodriguez opened Nuestra, a Puerto Rican inspired restaurant in Worcester, in January of 2020. When COVID-19 arrived months later she discovered Nuestra wasn’t eligible for the federal or state funding that thousands of other establishments received.

To qualify, restaurants were required to show payroll and salary for years before 2020. Those figures didn’t exist for a restaurant that weren’t open in 2019.

“[I was] determined and knew that ‘no’ is not an OK answer,” Rodriguez said. “A door may close but you may need to kick down another door.”

Rodriguez then applied for conventional loans only to be led to more closed doors. Less than 10 minutes after applying for an Economic Injury Disaster Loan, she received notice that her poor credit score resulted in her application being denied.

Rodriguez used the dead end with the SBA to create a new path for herself and Nuestra.

She not only learned how to improve her credit but wanted to ensure others didn’t have to follow her journey as an entrepreneur.

Rodriguez extended the “Nuestra” brand to include financial advising. She started Nuestra Financial in April of 2020.

“Now I’m helping others. I’ve been able to restore my credit,” Rodriguez said. “I’ve been able to help others restore their credit and be able to help them make a business themselves if they so choose. I’ve been able to survive.”

Without grants and other funding, Rodriguez managed to keep her restaurant open through funds generated from Nuestra Financial.

“I was very quiet about it in the beginning. I didn’t want people to be like, ‘Oh look at this girl, she just opened a restaurant in the middle of a pandemic,’ and talk smack,” Rodriguez said. “About a month or two later, a light bulb hit and I was like, nobody pays my bills but me. I needed to mind my own business and not worry about what other people thought.”

In creating Nuestra Financial, Rodriguez said she’s helped Worcester residents restore their credit and purchase new vehicles and homes.

Rodriguez said financial literacy is rarely taught to children in school and wasn’t something she learned. When a situation arises like a rejection notice for an economic disaster loan, many don’t know how to respond or where to find answers.

Rodriguez said she’s helped young and old people, along with those who have bad credit or no credit.

“We lack the confidence, including myself, because we weren’t taught,” Rodriguez said. “So if you don’t know something, you weren’t taught, you’re not going to be confident about it.”

Coming out of the pandemic, Rodriguez remains confident about both her businesses. Nuestra, the restaurant, while closed for daily service continues to provide catering services. Rodriguez is still preparing what the future holds for the restaurant but plans to announce an update soon.

As masks start to become less a part of daily routines, Rodriguez, as a small business owner, doesn’t envision many differences from this year to last.

So many aspects of life remain uncertain from rising food costs to a potential third booster for vaccines and whether the country will ever reach herd immunity for COVID-19.

The pandemic arrived with Rodriguez immediately pivoting. As it approaches its potential end, Rodriguez will continue to do what helped her to navigate it.

“I feel like there is no new normal just yet,” Rodriguez said. “I think we’re all just trying to adjust and pivot at the same time and getting creative. I think it’s where we all are.”

Related Content:

Owner of Worcester’s Nuestra restaurant, closing due to COVID impact, has something she’d like to say to Gov. Baker

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Columbus Mattress Wholesale moves to newer, larger Gahanna store

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More than four years back, Cathryn Clark’s boyfriend, Christopher Robbins, was on the hunt for a new mattress. He just couldn’t find one at an affordable  price. 

Clark, 29, and Robbins, 34, who are now engaged, were living in Franklinton, where they still live today.

They had no experience owning or operating a small business; Robbins worked as a retail assistant for SAS Retail Services while Clark worked as the communications director for two Methodist churches. 

But in 2017, Robbins, with Clark at his side, took the leap and opened Columbus Mattress Wholesale on the West Side, with the goal of  helping low-income consumers secure mattresses and other bedtime products.  

“We really wanted to bring a store to people that, you know, they weren’t paying an arm and leg, but they still could get a good night’s sleep,” Clark said.

Customers at Columbus Mattress Wholesale can pay cash or credit, for example, but the business also works with financing companies that serve people without credit scores, with bad credit or who are lower income. 

Last month, the business made a big move. It expanded from its original location on Harrisburg Pike to a store double the size at 435 Agler Road in Gahanna.

Clark said she and Robbins saw a need in the broader area, with many of their customers coming from outside the Hilltop, such as Linden.

Nestled between Dollar Tree and the Ohio BMV in Gahanna, the new storefront opened Memorial Day weekend and sells mattresses, bed bases, bed frames and pillows. Mattress prices range from under $100 to more than $1,000, depending on the size and brand, which includes some well-known names such as Serta, Beautyrest and Casper.

Clark said while she and Robbins originally sold solely Ohio-based brands, they’ve branched out to national brands as business has grown.

Columbus Mattress Wholesale also offers free same-day delivery on most orders from customers living in Columbus. 

Clark does a little bit of everything for the business, from running communications, to working on the sales floor, to managing the sales team, to ordering what they sell. 

She said a big mission for herself and Robbins, beyond doing business, is aiding the community.

“We’ve seen a lot of people struggle,” Clark said.

Clark said she and Robbins work to mentor other people who are hoping to open or currently own a small business. She added that the store starts employees at $17 per hour.

She and Robbins haven’t decided yet what they will do with the original location — which is currently closed — but said they might shift it into an accessory store.

[email protected]

@SarahEDon

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