From Bad to Good: How to Transform Your Credit Score

Understanding and Improving Your Credit Score with O1ne Mortgage

Having a bad credit score can make it difficult to borrow money and cost you more in interest. However, you can fix a bad credit score by paying bills on time, keeping credit card balances low, and using credit-strengthening products like secured credit cards. At O1ne Mortgage, we understand the importance of a good credit score and are here to help you navigate the journey to financial health. Call us at 213-732-3074 for any mortgage service needs.

What Is a Bad Credit Score?

A bad credit score is a FICO® Score below 580 or a VantageScore® below 600. Lenders may have different ideas of what constitutes a bad credit score when reviewing a loan application. The credit scoring models separate credit scores into ranges so you can gauge where you stand and take action to improve your credit.

FICO® Score 8 Ranges

300 – 579: Poor
580 – 669: Fair
670 – 739: Good
740 – 799: Very good
800 – 850: Exceptional

VantageScore 3.0 Ranges

300 – 499: Very poor
500 – 600: Poor
601 – 660: Fair
661 – 780: Good
781 – 850: Excellent

Consequences of a Bad Credit Score

A low credit score can make it more difficult to get approved for a loan or credit card. If you do get approved, you’ll be less likely to qualify for the lowest rates and best terms. A bad credit score can lead to these roadblocks:

Potential rejection when applying for credit
Difficulty getting a rental application approved
Required security deposits for utilities
Trouble getting a new cellphone or phone contract
Pause during an employment background check
Higher insurance premiums in some states

How to Improve a Bad Credit Score

No matter where your current credit score falls, you can boost your financial health starting now. Try these short- and long-term strategies to take control of your credit and improve your scores.

1. Check Your Credit Score

First, check your credit score for free to see where you stand. Your FICO® Score is most impacted by the following factors:

Payment history (35%)
Amounts owed (30%)
Length of credit history (15%)
Credit mix (10%)
New credit (10%)

It’s also important to check your credit report for any inaccuracies. You have the right to dispute items on your credit report, including inaccurate personal information or accounts fraudulently opened in your name.

2. Pay Your Bills on Time

Because payment history is the biggest contributor to your score, take steps to ensure you never pay late:

Set up autopay for recurring bills
Change your payment due date
Set calendar reminders
Ask for help if you’re concerned about missing a payment

3. Pay Down Debt

Work on paying down revolving debt, such as credit card debt. Ideally, you’ll pay off your credit card bill in full at the end of every month. But if you can’t, and you’re currently carrying a balance, bring down that debt with these approaches:

Debt avalanche method: Send extra money to the highest-interest card first
Debt snowball method: Pay off small balances first with any extra money
Balance transfer credit card: Use a 0% introductory APR period to pay off balances without accruing more interest

4. Limit New Credit Inquiries

If you’re focused on increasing your score, consider limiting or pausing new applications for credit. A hard inquiry happens when a lender checks your credit to evaluate you for a financial product. It will appear on your credit report and may knock a few points off your credit score.

5. Boost Your Credit

Signing up for Experian Boost® for free can help you strengthen credit using your existing financial history. Experian will search your bank account data for cellphone, utility, rent, insurance, and popular streaming service payments, and you can choose which accounts to add to your Experian credit file.

6. Get Help Building Credit

If you’re having trouble getting approved for a credit card or loan on your own, you can build credit history with the help of others or with a secured credit card or credit-builder loan. Here’s how:

Become an authorized user on someone else’s account
Work with a cosigner who has good credit
Apply for a secured credit card
Apply for a credit-builder loan

How Long Does It Take to Improve Your Credit Score?

There’s no hard-and-fast rule that states when you can expect to see credit score improvements. But if you stick with responsible credit behavior and add positive payment history to your credit report, you can start to see improvements in a month. Large increases can take several months or more.

How to Maintain a Good Credit Score

Once you’ve done the hard work to fix a bad credit score, keeping up the momentum is the next step. To get the best access to low rates and favorable terms on a range of financial products, aim for good credit or better. A good FICO® Score ranges from 670 to 739, while a very good score is 740 to 799.

Here’s how to keep your credit strong:

Pay all bills on time
Maintain low balances on credit cards
Only seek out new credit when necessary
Keep your oldest credit card account open
Make a budget that helps you spend less than you earn

The Bottom Line

Poor credit isn’t a reflection of who you are as a person; it’s merely data about your personal financial history, and it’s never too late to tell a new story. Start with strategies that improve your score, and then use your newfound knowledge and confidence to keep your score robust. Once you start seeing the positive effects of having good credit, you may be even more motivated to continue on the journey.

For personalized mortgage services and expert advice on improving your credit score, contact O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals and secure the best mortgage rates available.