Are you worried about your credit score?
You might not think about it very often, but your credit score plays a big part in your ability to live your life the way you want to. But what do you do if you’ve got bad credit?
Don’t worry, we are here to help. Read on for the best ten tips and tricks to help you improve your credit score.
1. Check Credit Reports
To improve your score, you need to find out what you’re dealing with. So, you should first pull up a copy of your credit report.
This report holds information on your debts, payments, and how you manage your credit. It’ll have any accounts that are in collections, or any bankruptcies or repossessions.
You can get your credit report from credit bureaus — Equifax, Experian, and TransUnion. You’ll also have access to a free copy of your report once every year from them.
2. Flag Credit Report Problems
Your score could have taken a hit due to an error on your report. When you go through your report, check for mistakes.
Look out for payments marked as late when you paid on time. You should always keep evidence of when you paid anything that affects your credit score to hand. You might need it in case you need to dispute anything.
Also, look out for anything too old to count towards your score. A bad payment can only stay on your report for 7 years. Bankruptcy can stay for between 7–10 years depending on the type.
If you spot an error, dispute it to get it removed. Credit bureaus have 30 days to look into it and get back to you.
3. Pay off Due Debts
Payment history is the biggest single part of your score. The more overdue a payment is, the bigger the negative impact on your score. After you’ve stopped making new purchases on finance, use that money you’ve saved to pay down your cards.
Where you can pay your owed balances in full. They will mark the account ‘paid in full’. This reflects much better on your score than having an amount remaining. Also, by paying off the full amount, you avoid ongoing finance charges.
4. No Credit Applications
While you’re repairing your credit score, don’t apply for credit cards. Each time you apply for a new one, your lender will check your credit. This appears on your report and will impact your score.
Opening a lot of accounts over a short time is a warning sign. It may suggest that you’re in a poor financial situation. This will then bring down your score further.
Having a small number of accounts that have been open a while shows financial stability. It lowers your risk level and can be positive for your score.
5. Avoid New Credit Card Purchases
New credit card purchases raise your credit utilization rate. This is the ratio of credit card balances to credit limits.
You can work this out yourself by taking the amount you owe but your card’s credit limit. The higher the balance, the worse the credit utilization rate. The higher the rate, the more it could hurt your score.
It’s advised that you keep your credit utilization rate under 30%. So no more than $1,500 on a card with a limit of $5,000.
6. Pay Bills on Time
When thinking about credit, most people focus on their debts at the expense of their normal bills. This is the last thing you want to do.
Your credit report also includes how quickly and reliably you pay your monthly bills. They use your past performance to predict your future reliability.
7. Don’t Close Accounts
Closing a credit account won’t improve your score in general.
If you close a credit account with payments due, that amount will still show on your score. It will continue to do so until it’s paid off. So, you should keep accounts open and reduce the balance over time.
Even closing a zeroed-out account, can impact your score. Your credit history makes up almost 20% of your score.
8. Seek Professional Help
If you feel you can’t cope with your existing finance repayments and monthly expenses, there is no shame in seeking help from a credit counseling agency. A credit agency will help you to create a monthly budget and debt repayment plan.
What may look like an impossible situation for you could be the easiest financial situation they have worked with this week! You can find a certified credit counselor via the US Trustee Program from the Department of Justice.
9. Talk to Your Creditors
You might not want to call them, but your credit card company might surprise you with the help they offer. The best thing to do is to talk to them about it as soon as possible.
Credit providers will normally try to help you. They want to be paid back after all! Most of them will have a temporary hardship program that can cut down your monthly repayments and/or interest so you can recover.
If you let them know early enough you will miss a payment, they might be able to help. This can help you pay down any due balances and, in turn, raise your score.
10. Mix Up Your Credit
Relying heavily on a single type of credit can damage your credit. Consider ways in which you can spread your repayment types.
If you currently only have a credit card or installment loans, consider consolidating some of it into the other form. Proving that you are eligible for multiple forms of credit and can manage both revolving credit (credit cards, etc.) and installment loans (fixed payment agreements) can improve your creditworthiness.
Improve Your Credit Score Today
As you can see, a poor credit rating isn’t an impossible situation. Once you decide to improve your credit score, there are plenty of options available to you. Take control of your finances and keep your credit utilization low.
If you need a loan to help consolidate your existing finance, check your eligibility today.