Being financially independent at a young age is a tricky task, mainly because young people, and even many adults, lack experience and education in the financial field.
Statistics have shown that people between 18-39 have an average credit score of 670, which may be considered fair, but is not enough for things like getting approved for an apartment, a car loan, or even finding a job. Since the average credit score in the U.S. is 711, in big cities such as New York or Los Angeles, it can be challenging to access some services with just a fair credit score.
But there is still hope. As difficult as it may seem, you can repair your credit to enjoy the accomplishment of having your own apartment, and to make the situation a bit easier, we have prepared a few tips that may come in handy. Here is how to fix your credit before moving into an apartment!
Understand How Credit Works
The first step in correcting your credit score is to learn what it is, how it is calculated, and its components. Knowing the basics will make planning and managing your credit growth easier. The most crucial information you should consider is how your credit is calculated. The standard system usually relies on the following factors:
- Payment history (35%)
- Amounts owed, aka utilization rate (30%)
- Length of credit card history (15%)
- New credit (10%)
- Credit mix, which includes credit cards, installment loans, finance business accounts, and mortgage loans (10%).
After you understand how the credit score works, it is time to do a self-evaluation using an official report provided by various websites for free to check the details of your score.
Eliminate Late Payments
Did you know that a single late payment can not only drop your score by up to 110 points but also stains your credit for seven years? The basic rule of late payment is that the later it is, the worse. Removing late payments requires patience and persistence.
There are a few options for requesting removal; calling the original creditor and asking for a goodwill adjustment is the most typical and effective method. If they refuse, you can even agree to sign up for automatic payments to get the late fee removed. Otherwise, you can start paying the oldest invoice first and keep track of the new ones so that you have proof of responsibility to your landlord.
Eliminate Any Collection Accounts
One of the most problematic items that someone can have on their credit record is a collection account. This situation appears when you are more than 150 days late on a payment. If you have a collection account on your credit report, you should make an effort to have it removed.
The first step is to check for any errors and dispute them with the collector, but since it might be a tricky task, you can find a credit repair specialist to help you investigate and negotiate the situation. When you reach the collector, preferably in writing, do not agree to pay the collection but instead negotiate a “pay for delete.” After receiving a written agreement, you are allowed to pay a collection account to get the account deleted.