Does your credit need to be repaired?

Presented by Mike Zirbel

Many people saw their financial plans derailed in 2020. You or a spouse may have lost your job or faced unexpected expenses for medical care, helping family members, or for other reasons. Financial stress may have forced you to make tough choices, like deciding what bills to pay, reducing your savings, or borrowing from a 401 (k) account. As a result, you may need to get back on track financially. One of the first areas to address should be your credit score.

Even if your finances haven’t taken a hit during the pandemic, it’s wise to keep track of your credit score. A strong credit rating forms the basis of a solid financial foundation. It affects · your ability to find a job; your access to loans for a car, a house or an education; and your ability to qualify for various types of insurance. Can You Fix Or Improve Your Credit Score? Yes, but the first step is to understand what your credit score and report are based on, and how to monitor your credit.

Understanding Your Credit Score
Here’s what you need to know about your credit score:

Your FICO score. The FICO score, based on a model created by Fair Isaac Corporation, is the most commonly used scoring system for a person’s credit history. Lenders use these scores to assess your creditworthiness, which means the likelihood that you will pay off credit cards and loans on time. A lower FICO score can lead to higher interest rates for credit or loans, as well as shorter repayment terms, the requirement of a co-signer, or even outright denial of a loan.

FICO scores range from 300 to 850. In general, scores above 800 are considered excellent, while scores below 640 are considered below average or sub prime. Most lenders use the average score of the three best-known rating agencies (Experian, TransUnion, and Equifax).

Your FICO credit score is based on five factors:

  1. Payment history (35%)
  2. Total amount owed against available credit, called credit usage (30%)
  3. Length of credit history (15%)
  4. Types of credit used (10%)
  5. New credit cards or open loans and credit inquiries (10%)

Alternative credit scores. Besides FICO, these recently adopted sources provide alternative credit scores:

  • Advantage provides a unique score based on the three major reporting agencies, but differs from FICO in that it gives different levels of importance to different parts of your credit report. Most websites that offer free credit scores, like Credit Karma, use the VantageScore.
  • UltraFICO, which is only used by Experian, allows consumers to improve their credit score by linking to their checking, savings or money market accounts.
  • Experience boost helps consumers improve their FICO score by giving them credit for on-time phone and utility payments. Experian Boost is only offered through Experian.

UltraFICO and Experian Boost are primarily intended for consumers with risky credit scores, as well as people who have not used enough to receive a score. These services are especially useful for people with limited credit scores.

Understanding your credit report
Once you know your credit score, you’ll also want to know what went into that three-digit number – which you can find out by looking at your credit report.

Credit reports contain a complete record of your credit history, including personal information, account information and whether you paid your bills on time. Your credit report also contains information about any accounts that were sent to a debt collector and whether you have filed for bankruptcy or received a bankruptcy discharge.

Checking your credit report
With much of your financial life based on your credit report, accuracy is important. Unfortunately, the Federal Trade Commission (FTC) estimates that one in five consumers has at least one error in their report. This is why it is so important to make a habit of checking your credit report. There are several ways to do this:

  • Go to Each year, everyone is entitled to a free report from each of the three major credit bureaus.
  • Go to Innovis, another reporting agency that provides free credit reports. Although your free report does not include a credit score, it is wise to verify the information from this source, as companies can use it to check your credit history.
  • Go to Credit Karma, Nerdwallet, and The bank rate for free access to one or two of the major credit reports, as well as additional services such as credit monitoring and free credit scores.
  • Discover organizations such as Life lock and Identity custody which, for a fee, offer better credit monitoring and identity theft protection.

Freezing your credit
Since 2013, consumers can freeze their credit report for free. A credit freeze imposes restricted access to credit reports, making it more difficult for identity thieves to open accounts in someone else’s name. During a freeze, you can still access your credit history and open new accounts, but you will need to temporarily lift the freeze to do so.

A freeze will not affect your credit score. But you should know that a freeze cannot prevent someone else from debiting your existing accounts. So even if you have a credit freeze in place, make sure you continue to monitor your checking accounts.

Repairing your credit: 7 important steps
Repairing your credit score will take time, patience, and discipline. Know that there is no quick fix. Instead, follow these steps to improve your credit score over time:

  1. Examine your credit reports for errors and dispute any inaccurate or missing information. Be aware that simply checking your credit report or FICO score will have no effect on your credit score. You will need to take steps to dispute the incorrect or missing information. The FTC website provides consumer information on how to file and resolve credit disputes.
  2. Pay your bills on time. Even if you’ve missed payments, be up to date with your bills.
  3. Deal with overdue accounts and reduce your debt load. You can start by paying off debts with smallest to largest balances (the snowball method) or the highest interest rate to lowest (the debt avalanche method).
  4. Be careful when opening new credit cards. New credit accounts should only be opened when needed. While closing unused credit cards is often seen as a short-term strategy to increase a credit score, you should be aware that closing an account does not remove it from your credit report.
  5. Consider consumer credit counseling. A great resource for educational materials and workshops is the United States Department of Justice American Trustee Program, which maintains a list of credit counseling agencies approved to provide pre-bankruptcy advice.
  6. Beware of credit repair services. These companies offer to act on behalf of the consumer and negotiate with creditors, but they can also charge unreasonable fees and upfront fees, as well as deceive customers about their ability to repair their credit.
  7. Only consider bankruptcy as a last resort. Filing for bankruptcy can allow people to keep their homes, cars and other assets. However, it also has serious consequences, including lowering your credit score. If you are considering bankruptcy, the US Trustee program maintains a state-by-state list of government approved organizations who oversee bankruptcy cases and trustees.

Achieve your financial goals
Your credit history is an important cornerstone of your financial plan. This is why it is so important to commit to monitoring and managing your credit score and your report. While the process can take time and patience, the work to repair your credit is worth it. This is an important part of staying on track to achieving your long-term financial goals.

These tools / hyperlinks are provided as a courtesy and for informational purposes only. We make no representations as to the completeness or accuracy of the information provided on these websites.

Michael W Zirbel is a financial professional at 307 Financial Services, LLC at 416 E Main ST. Riverton, Wyoming. 82501. It offers securities as a registered representative of the Commonwealth Financial Network®, a member of FINRAL’SIPC. He can be reached at 307-856-8200 or

© Commonwealth Financial Network 2021®

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