Should You Fix or Ditch Your Credit Score?

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Should You Fix or Ditch Your Credit Score?

Risky credit score scams

Should You Fix or Ditch Your Credit Score - PinterestCredit scores, for better or for worse, are used in America to help determine someone’s creditworthiness. This affects all sorts of things from home loans to car loans to rental applications.

Your credit score is used by lenders looking to know more about your financial wellbeing. These credit scores take into account the types of credit you have, the payments that you make, the age of your accounts, what kind of accounts they are, and more.

If you have good credit, you’ll be able to do things like get better car insurance or find a solid rental pretty easily. But if you have bad credit, those things suddenly become a lot harder.

It’s easy to beat yourself up over bad credit, especially since credit scores are so important in America. But try to separate yourself from this line of thinking. It isn’t benefiting anyone and it’s only harming you in the process.

Instead, center yourself. We made bad choices, or things that happened outside of our control, and while we’re not completely at fault for what happened, we are responsible for fixing our situation. Framing things like poor credit scores in this way allows us to detach from some of the shame surrounding bad credit and will empower us to fix our credit.

Why You Might be Tempted to Give Up On Your Credit Score

Bad credit tends to haunt people. Not only does it make qualifying for loans harder, but bad credit has further-reaching consequences than people realize.

What Is the Worst Credit Score You Can Have?

With most credit scoring models, credit scores range from 300 to 850. 300 is the lowest score you can have and 850 is the highest score that you can have. If you have a score below 580, you’re generally considered to have a very poor credit score.

Poor credit scores restrict access to loans and leave you prey to credit repair schemes. If someone is trying to sell you a product that will suddenly help your credit score go from very poor to excellent, run in the other direction.

Fix or ditch your credit score

There are tools that can help you build your credit, but a credit repair journey is going to take anywhere from six months to several years.

What Affects Your Credit Score?

While it can feel shameful to have bad credit, I want you to check that attitude at the door. Your credit score does not reflect your morality in any way shape or form. Plenty of responsible people have bad credit scores because of life circumstances. And even if you were once financially irresponsible and that’s how you got into your bad score, you’re looking for help. And that shows how amazing your character is that you’re willing to take this journey.

Plenty of situations can cause your credit score to plummet. You can run into some mental health struggles and spend money without knowing how to control yourself. You can get into medical debt, and not be able to pay it, so it’s sent to collections. If you miss any payments on your accounts, that’s a ding to your credit.

Unfortunately, it’s fairly easy for your credit to slip, but it’s incredibly difficult to build your credit again. And that can feel like an insurmountable feat when you’re starting in the very poor credit range. However, it’s not impossible and many people have gone from bad credit to good enough credit to buy a home.

You don’t suddenly wind up with bad credit overnight. It takes time for bad credit to accumulate, even if it’s happening mostly behind the scenes. There are five main categories that affect your credit score.

  1. New credit. New credit affects credit reports because it requires a hard pull on your credit. Hard pulls will decrease your credit score temporarily, but it usually bounces back up within a few months. You want to avoid doing multiple hard pulls on your credit in consecutive order because the credit reporting agencies often see this as financially risky behavior and will flag your credit score. 
  2. Credit mix. What kind of credit you have is equally important. There are several different kinds of credit: installment credit, revolving credit, and open credit. Each is structured differently and is reported to the crediting agencies in a different manner. Having several different types of credit helps show your creditworthiness because you can manage multiple kinds of debt.
  3. Credit cards credit scoreCredit history length. Length of credit history is also important. Credit scores want to see that you’ve maintained good relationships with your creditors over long periods of time. This is why new credit will adversely affect your credit score for a few months. It brings down the age of your credit. The more history you have, the more creditworthy you seem.
  4. Credit utilization. Along with the amount of money you owe, credit scores will take into consideration how much credit you’re using. What they want to see from consumers is a high credit limit and low credit utilization. A good rule of thumb is to only be utilizing 10% of your available credit on revolving credit accounts. That means that if you have a $1,000 credit limit, you should only be utilizing only $100. Low credit utilization helps prove your creditworthiness because it shows how responsible you can be with using credit in the eyes of credit scoring models. 
  5. Payment history. This is the most important component of your credit score. Payment history tracks all the payments you’ve made on all of your accounts. If you can keep your payments current, you’ll score won’t be affected much. But if you fall behind, even one missed payment can negatively affect your credit score.

Opportunities in Life Can Affect Your Credit Score

While credit scores are theoretically objective, there are outside circumstances that might make it easier for one person to have a good credit score than another. Although credit scores do not consider one’s income, a study done by the Consumer Financial Protection Bureau concluded that those in lower economic classes tend to have lower credit scores while those from a higher socioeconomic status tend to have higher credit scores. Equal credit opportunity is unfortunately not a reality.

Even at the start of their financial journeys, those who live in lower socioeconomic demographics face more challenges than those born into privilege. It’s exceptionally important that if you come from a lower-income background, you do not beat yourself up about having a lower credit score. The odds are statistically not in your favor, and the system favors those who already know how to get ahead, creating more financial inequality.

More affluent individuals have better access to resources to improve their credit. They can be added as authorized users on accounts and their parents are generally more knowledgeable about how the system works.

Additionally, low-income individuals are preyed upon by predatory lending companies because they tend to have poor credit or no credit. And these types of businesses often cause severe harm to people’s credit.

The Financial Impact of a Bad Credit Score

Bad credit isn’t something that you want to ignore. When you ignore it, the problem worsens into a bit of a monster. And it doesn’t just affect your ability to purchase things using credit. Bad credit has far-reaching consequences.

Credit score life opportunities

  • Trouble accessing loans. One of the most common problems with bad credit is you’ll be unable to borrow more money. This means that you may have to postpone big purchases like a house or a car and you won’t have any emergency credit to use if you have a seriously bad emergency. While it’s good to stay out of debt, not having access to debt in an emergency could be detrimental to getting the care that you need. And you don’t want your poor credit negatively affecting that. 
  • Fewer renting options. Potential landlords will also run your credit to see if you’re going to be a responsible tenant. If you have bad credit, they might deny you rent because they’re not positive that you’ll pay your rent on time. You might have to resort to some shifty living situations if you’re unable to rent from a reputable company—and this could be dangerous for you. 
  • Paying a deposit for utilities. You might have trouble with utility companies as well. If they see you have a spotty credit history, they will want payment upfront for your utilities. This will make moves to new dwellings more expensive because you don’t have solid credit.  
  • Higher car insurance. Car insurance companies also check credit histories when assessing how much risk they’re going to take on to insure you. If you have poor credit, your rates will go up.

Are There Real Alternatives to Using Your Own Credit Score?

If your credit score isn’t the best, it can be tempting to look at credit score alternatives. However, many “alternatives” to credit scores are dangerous and could make your credit journey more difficult. You want to avoid both Employer Identification Number (EIN) schemes and credit protection number (CPN) scams. These problematic “solutions” can actually damage your credit score further and make it harder for you to do things like rent a home or purchase a vehicle. 

Employer Identification Number (EIN) Schemes

Some people promise that you can connect your credit history to your Employer Identification Number instead of your Social Security Number. However, this is not the case, according to Experian

If someone is promising to wipe out your credit score and replace it with a higher one using your EIN, you need to run the other way. They’re trying to scam you.

Credit Protection Number (CPN) Scams

Another common scam is known as a credit protection number or credit privacy number. Credit repair companies that offer these are essentially offering a fake Social Security Number. But they’re not harmless. These numbers are often stolen from the young, elderly, and incarcerated. If you have a CPN, you’re committing fraud, which is illegal. If a credit repair company offers this as a solution, you need to run.

What to Do if You’ve Fallen for a Scam

Risky credit score scams

So, you’ve fallen for a CPN or EIN scam, and you’re not sure what to do next. Don’t shame yourself. You don’t know what you don’t know, and plenty of people have fallen for the same scam. It isn’t your fault, but it is your responsibility. And there are several avenues that you can take to protect yourself from prosecution.

First, report the organization to your state attorney general. They’ll be able to do something about the organization and keep other people from falling for the same scam.

Next, file a complaint with the Better Business Bureau and the Federal Trade Commission. Again, they’ll be able to take further action against the company to prevent more people from harm.

Finally, you can seek legal action by consulting an attorney.

Whatever you do, don’t ignore the situation. This action will only make things worse for yourself. And your credit score is very important. You don’t want a lack of action to hinder you from living your best financial life.

Legitimate Tactics to Fix Rather Than Ditch Your Credit Score

While EINs and CPNs are scams, there are very legitimate things that you can do to improve your credit score.

  • Pay your bills on time, every time. This is one of the most crucial things you can do to help your credit score. Showing that you can manage money responsibly by paying your bills on time is huge for your score.
  • Apply for new credit. This technique works because it diversifies your credit mix and helps increase your total credit limit. Both of these things factor positively into building a good credit score. However, keep in mind that applying for new credit will hurt your credit score in the short term because it requires a hard pull on your credit and a new account will decrease your average age of accounts. With this in mind, you’ll want to only apply for one or two cards at a time and wait a few months before applying for another card. In addition, remember that this strategy is a long game because it will take a few years for your new accounts to gain enough age to significantly help your credit score.
  • Increase your credit limit. If you are consistently paying your bills on time, you can ask your lenders for an increase in your credit limit. This technique will reduce your credit utilization, even if you keep spending the same amount of money a month on your card. But, do this only if you’re able to be responsible with your credit. You don’t want to be maxing your card out consistently and being in debt each month. Increasing your credit limit might tempt you to spend more. Don’t use this technique if you cannot handle the temptation.

    Rebuilding your credit score

  • Sign up for Experian Boost. Experian Boost is an alternative data program that Experian offers. You attach your bank account to their credit reporting system and they track the bills you pay. Monthly bills that you pay on time will increase your credit score. I did it, and it added my Hulu account to my credit report and my score increased by 10 points.
  • Pay down any outstanding debt you have. Reducing the amount of money you owe to credit card companies and other lenders is crucial to raising your score. Doing this allows you to reduce your credit utilization. These two numbers are crucial in determining your credit score. You’re going to have higher credit scores if your cards are paid off fully and on time every month. If you’re unable to do that right now, you need to make a plan to start paying off your debt
  • Check for credit report errors. Another thing that’s helpful is to request your credit report and ensure that you don’t have any errors on your report. Many people find at least one error that can be corrected. You can also look through your report and see exactly what companies you owe money to and if anything is in collections. It’s a great way to check on your financial wellbeing.
  • Consider a secured credit card. If you have bad credit, some credit card options might not be available to you. Thankfully credit card companies have created a product that helps those with poor credit improve their scores. Secured credit cards are kind of like credit cards that you prepay. Let’s say you want a secured card with a $500 limit. You pay the credit card company $500 and they hold that as a deposit for your account. That way if you use the card, but don’t pay them back, they already have the money and aren’t at risk if you miss payments.

The Bottom Line

Credit scores are essential to American life. They let companies know if they should lend you money, let you rent, or give you better rates on your car insurance. While there are many promises to get you a better credit score quickly, some are scams that you should avoid. Instead, you should follow our seven tips to raise your credit score.

Moriah Chace
Moriah Chace
Moriah Chace is an award-winning, queer Gen Z author known for promoting financial literacy. Moriah's financial articles have appeared in The Motley Fool, Buzfeed, Bankrate & Bigger Pockets, Moriah is a leading voice in helping people take control of their finances. As a lover of all things DIY, she spends her free time fixing up cars from the 90s and vintage RVs.

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