Credit scores are an important factor when it comes to securing a credit card, mortgage or auto loan. If you are able to obtain credit, lenders will take your three-digit number into account again when determining your interest rates.
According to a recent Wall Street Journal article, individuals who have a score of 620 may have an interest rate about 7 percentage points higher on a car loan than someone who has a credit score of 780.
So how can you get rid of costly bad credit?
If you have a poor credit score, the article advises not to cut off your credit use entirely. Taking this approach will make it impossible for you to demonstrate more responsible spending and repayment habits. For that reason, you may instead want to create a strict and detailed budget that will allow you to carefully use your credit in amounts that you know you can pay off at the end of each billing cycle.
Another way to improve bad credit is to check your credit report for any inaccuracies or problematic items. A credit reporting error on your document could be lowering your score without just cause, and you may not even know it. Oftentimes a credit repair attorney is a helpful asset if you're in this situation, as they have the know-how to hold credit companies accountable for improper reporting.