Not everyone has a perfect credit rating as some fall below the average credit score in the U. S which stands at 710. With a dented credit score, especially one that falls below 670, you can find it challenging to qualify for things that you dream of, such as acquiring a new car, renting a wonderful apartment, or purchasing your desired home. The good news is you can rebuild your wrecked credit with just a few steps. All you need to know is that it doesn’t happen overnight and requires patience and commitment. Once this has been realized, you will be able to qualify for loans with better terms and low-interest rates.
If you have a poor credit score and are looking for ways to fix it, then this article is meant for you. Read on to discover the simple steps you can take to fix your credit and better your credit score.
1 REVIEW YOUR CREDIT SCORE AND REPORTS
Credit reports provide information on how one has used credit over the last ten years. These reports can be obtained from any of these three bureaus, namely: TransUnion, Equifax, and Experian. Nearly all creditors report to the three bureaus, but some don’t, therefore it’s necessary to review the details on each of the reports provided by these bureaus. These reports are available at no cost. All you need is to make a request and will be served with a report or provided a link from where to download.
Credit reports are used in the determination of credit scores, and therefore it’s crucial to check them as well. Checking your individual score only needs a soft credit inquiry, which does not in any way hurt your score. If possible, check your score once a month.
2 MAKE PAYMENTS PROMPTLY
Payments made 30 days later after the expiry of the stipulated time will certainly go on your credit report and stay there for a maximum of 7 years. Even if you miss the deadline in just one day, your creditor can impose a penalty fee at their pleasure. By paying all your bills on time, you will help maintain your credit score above average and avoid being charged needless fees.
Subscription to automatic payments will all your billers can help ensure all of your payments are made on time. Always ensure your bank account has sufficient funds at the payment date to avoid incurring overdraft fees from your bank. Automatic payments are only ideal if you’re confident that your account will always have enough money to pay all your bills on time.
3 DISPUTE ERRONEOUS LATE-PAYMENT ENTRIES
Mistakes happen. Your mortgage provider may erroneously indicate payment was made late yet it was made on time. On the other hand, a credit card provider can inadvertently make an error when entering a payment.
If you discover errors in payment entries, be it in current accounts or accounts that have been flagged, you can file a claim with the credit card issuer.
Since your credit history plays a crucial role in determining your credit score, it’s important to ensure all the errors are corrected.
4 INCREASE CREDIT LIMITS
Your credit card utilization plays a vital role in determining your credit score. The ratio of credit utilized to the overall credit available can make a huge difference.
Overall, carrying a balance in excess of 50% of the available credit will definitely have a negative impact on your credit score. Always avoid maxing out your cards as this will dent your score.
Another way of bolstering your ratio is by paying a significant portion of your balances or simply extend your credit limit. For instance, if you owe $2,000 on a card with a $4,000 limit and you get the limit upped to $6,000, your ratio automatically improves.
To have your credit limits extended, call and ask politely. If you have a promising payment record, many credit card companies will be more than willing to extend your limit — above all, they need you to carry a substantial balance. That’s how they earn money.
Keep in mind not to use extra available credit, since by doing so, you will be back in the same available credit ratio category and this will ultimately hurt your score.
5 OPEN ANOTHER CREDIT CARD ACCOUNT
Creating a new credit card account can help boost your credit card utilization. Provided no balance is carried on that credit, your available credit instantly grows by that card’s limit.
Go for a card that charges no annual fee. Opening a new account on a bank where you already have an existing account is your best bet. Fortunately, cards that carry no annual fee tend to charge relatively high interest rates, but if no balance is carried out, the interest rate is insignificant.
But again, be wise. The objective here is not to access additional money, but to bolster your credit score. If this is not your goal, then don’t bother to open a new account.
6 AVOID TAKING OUT CREDIT UNLESS YOU NEED IT
Whenever you apply for credit, your creditor will perform a hard credit check. This can lower your credit score by up to five points. In addition, it will reduce your moderate account age, which can also hurt your score. Therefore, as a rule of thumb, only apply for credit when you need it.
7 KEEP CREDIT ACCOUNTS OPEN
The overall age of your credit history makes up 15 percent of your entire credit score. Keeping accounts open will certainly bolster your credit score with time provided they are used appropriately. Keep in mind to make minor purchases from time to time and pay off the balance right away, to ensure your accounts remain active. Dormant accounts may ultimately drop off your credit score, despite appearing on your credit report.
8 TAKE ADVANTAGE OF CREDIT COUNSELING
Most non-profit organizations offer credit counseling at very low prices while others review your finances free of charge. Credit counselors in these organizations perform a comprehensive review of your finances and advise you accordingly on how to prioritize debt repayments.
With these simple steps, you can quickly turn around your bad credit score in a matter of no time. So, if your credit score is impaired, the discussed above tips will help you to fix it once and for all.