The improvement of your credit score takes time and some financial costs, so you need to try to pay payments on issued loans on time. If a person damaged his credit score, he should turn to legal ways to restore it to a good one.
Different companies (usually short-lived companies) offer the services to improve the credit history for a small fee. They claim they have access to the databases of credit reference agencies. These organizations are fraudulent as after funds raising from clients, they disappear and do not make any credit history better. They do not have access to databases.
The information stored by the credit bureau about citizens is reliably protected and no one, even employees of these organizations, can delete the credit history. To change negative points from your credit history is possible only if the bank has transferred incorrect information about its client to the credit bureau, or a mistake has occurred due to a failure in the data storage system (this happens very rarely). Also, a person can become a victim of fraudsters who, using his ID data, have issued one or more loans. If the fact of fraud is officially established, the credit bureau will restore the citizen’s credit history.
Reasons for bad credit history
The main reason for the credit history deterioration is the violation of the loan agreement terms by the borrower. Even if a borrower took loans many times and repaid them without delays, and when repaying one of the last 3-4 loans made at least one untimely monthly payment, his credit history will not be perfect. Banks and MFIs send all information to the credit bureau, both on the perfect fulfillment of the loan agreement terms, and information on the delays in payments. A repaid loan without a single delay – improves the credit history, at least one delay in debt repayment – worsens it.
There are two types of bank faults:
- human factor – an employee of a financial company transferring information about a client to the credit bureau sent incorrect data.
- technical failure – there was a problem in the data transmission system, as a result of which the credit bureau received incorrect information about individual customers.
Also, the faults of the bank include such cases as the liquidation of a financial institution or a credit bureau (or the termination of the bank’s cooperation with a specific credit history bureau). In all these cases, information stops to reach the database, which is why the following is reflected in the credit history: client up to a certain point regularly paid his debt off, and then stopped doing it.
All the problems described are solved by contacting the bank or credit bureau, or representatives of the liquidated organization. Usually, there are no problems with correcting a credit history that has deteriorated due to the bank or a credit bureau’s fault. Such applications are processed quickly, credit history is restored in a period of 1-2 weeks to 1 month.
Fraudsters can spoil the credit history in the following way: get an ID and issue a microloan on it in the MFI online. This usually happens when a person loses his ID. Therefore, it is necessary to contact the police as soon as possible in case of an ID loss in order to have documentary evidence that a third party, and not its owner, has issued a loan for the lost ID.
In some cases, people who have lost their ID may not even know that loans have been issued for them. They find out about this only when they themselves apply for a cash loan to a bank or MFO and are denied due to bad credit history. It is possible to prove that the scammers have issued and did not return the loan with the help of the FBI, which will confirm the fact of the ID loss during the period when the loan was issued.
How to fix a fault in the credit bureau?
It is not difficult to correct information in the credit bureau. For this, you need to have a confirmation that the person is not involved in the credit history deterioration, i.e. he paid off all the loans regularly. Find out that the database of the credit history bureau contains fault information – usually obtained when you contact the bank to apply for a loan for the next time. The correction is carried out in 3 stages:
- verify the fault;
- get official proof of the fault in the credit bureau;
- get a list of credit bureaus in which credit history is stored.
- submit applications for correcting credit score.
Evidence must be attached to the application for correcting an error in the credit history. It can be a court decision, in case there was fraud or a certificate from the bank that the loan was repaid without delays.
How fast can you raise your credit score?
If a borrower is guilty of bad credit history, he has only one way to improve his credit history: to start purchasing new credit products and show the qualities of a perfect client – to make payments on the loan on time. Below there are all possible solutions to how fast raise your credit score.
Paying all available loans back is the first thing a borrower needs to do to raise his credit history. First, existing debts are paid back, then new contracts are signed in which lending terms are strictly followed. Only such an action plan will improve the credit score.
Financial institutions issue credit cards to citizens without checking the credit history. To issue a card, you must submit an application in which you indicate your personal data and place of work. The credit card limit will depend on the owner’s paycheck. The active use of plastic without delays in mandatory payments will increase the credit limit, as well as correct the credit history (you need to use the card for 2-3 months, then the data in the credit score will be updated).
Microloan in MFIs
Almost all microfinance institutions issue loans to individuals with bad credit history. Signing agreements with MFIs and their timely repayment is one of the best ways to improve your credit history. For new clients, many organizations offer interest-free short-term loans, so people will be able to restore their reputation in the eyes of banks without financial losses. Lending to MFIs is the best answer to the question: how to fast raise your credit history?
Buying goods on the instalment plan
Most home appliances and electronics stores allow you to purchase goods on an installment plan. People with a bad credit history will be able to buy goods without any problems. When buying on installment plans, a person enters into an agreement with the bank that approved the loan. Thus, information about him as a borrower goes to the credit bureau, as a result of which the credit history improves (provided that the person pays the debt on time).
Refinancing or loan restructuring
Refinancing or restructuring is the signing of an agreement with a bank that buys out the debt from another organization and then offers the client new terms. Usually, the monthly payment decreases, and the loan maturity date increases. This helps the client to avoid delays in payment and to keep the credit history good. Many banks are ready to help pay off the debt, even if there were delays on loans that provoke a bad history. Signing a loan refinancing or restructuring agreement and repaying it on time improves your credit history.
Some banks are ready to issue a personal loan without checking credit history, but the interest rate will be increased. A good option is to apply for a loan to a bank on the card the person gets a salary. Financial companies make concessions for such clients because they can track the transferal of funds from the employer to an account and thereby analyze his solvency.
Making a loan secured by a title or real estate is one of the possible lending options that will help improve your credit history. Such loans can be taken in banks (almost all organizations issue loans on collateral) or in MFIs.
Some banks have programs created to help clients prove their solvency and improve their credit history. Their essence is as follows: a person is issued a small loan amount for a period of up to 12 months, which he must repay without delays. Information about stable debt repayment is sent to the credit bureau, in such a way, the client’s credit history improves. In addition, a person has a good opportunity to get a great loan from a bank, where he received assistance in improving his credit history because he demonstrated his reliability to the company.
A bank deposit is a very good way to build trust from financial institutions. Even if a person made a deposit in one bank, and wants to get a loan in another, he can provide a document on an open deposit as his solvency confirmation. The credit history does not improve upon opening a deposit (since this is not a loan product), but it improves the client’s reputation.