10 Ways To Improve Your Credit Score
For many people, their credit score doesn’t matter – until
it does. If you’re one of those people who only haphazardly used credit, let
payments slip or closed accounts because the responsibility was too much to
bear, you’re not alone. You’re also not alone in the fact that buying a home,
vehicle or any other item of significant value will be exponentially more
difficult than had you nurtured your score from the get-go. That said, your
credit situation is not completely hopeless. With a bit of discipline, patience
and persistence, you can improve your credit score and get on the path to
healthy borrowing.
1. Sign Up
for a Secured Credit Card
For many people, the problem isn’t necessarily bad credit
but a lack of credit. Unfortunately, you need credit to obtain credit. A
secured card is one of the best ways to both build your credit and boost your
score. If approved for a secured credit card, you would need to make a deposit
to begin using the allotted limit. The deposit protects the lender in the case
of default.
2. Look Into
Score-Boosting Programs
If you struggle to qualify for a secured credit card with
even the loosest of qualification requirements, look into Experian Boost or
Ultra FICO. Both of these programs allow consumers to boost their scores with
untraditional financial information. Experian Boost gives the credit bureau permission
to review your banking data to ensure you’re paying your utility and
telecommunication bills on time. Ultra FICO grants the bureaus permission to
view your banking accounts to determine spending habits, which they can then
use to determine your creditworthiness.
3. Quit
Charging Items to Credit
If irresponsible spending is the reason for your low score,
it may be time to put the credit cards away. Credit utilization plays a huge
role in your credit score and is second only to payment history. If you continue
to charge purchases to cards with already high balances, you only risk making
your credit situation worse. If the temptation of available credit is too
great, take drastic measures, such as freezing your cards in a cup of ice.
4. Pay Down
Your Balances
Once you’ve removed temptation, it’s time to work on
reducing those balances. Start with the balances that are past due. In addition
to accruing interest, past due balances also acquire late fees. Before you can
make real progress on your score, you need to bring all your accounts to
current. For many borrowers, this is the most difficult step to take towards
good credit, as past due balances can be double, triple or even quadruple the
minimum monthly payment.
5. Negotiate
With Lenders
If you simply cannot afford to pay down past due balances,
your creditors may be willing to work with you. After all, they simply want to
be repaid. Call your lenders and ask them to waive late fees and interest fees.
If that’s not an option, lenders may, at the very least, be willing to reset
your minimum amount due to the standard amount.
6. Stay
Current on Your Payments
You know how awful it is to fall behind, so don’t let it
happen again. By keeping your debts in the green, you can show your creditors
that you’ve evolved into the responsible borrower they want you to be. In
exchange for your good behavior, they’ll report your timely payments to the
credit bureaus, which will, in turn, give your score a boost.
7. Dispute
Credit Report Errors
Now that you’ve done the hard part, take a few moments to
review your report in depth. If you notice anything that seems off, such as a
delinquent account you never opened or an inaccurately reported late payment,
dispute it. Even a minor error can reduce your score by as much as 60 to 110
points.
8. Don’t Be
Too Hasty To Apply for New Credit
As your score begins to climb, you may notice that new
credit card offers flood your inbox. Resist the temptation to apply for every
offer you receive. Every new application for credit results in a hard inquiry on
your report, which can ding your credit score. If not approved for the offer,
your score will go down even more. Wait for your score to climb to the "Fair”
or "Good” range before you begin to seek out new credit again.
9. Monitor
Your Report
Review your report each month to better understand how well
you’re managing your credit and where you should make changes. Credit
monitoring services also inform you of what you can do to boost your score even
more, such as increasing the minimum monthly payment on each account by $5 or
paying down your total balance by $200.
10. Use a
Personal Loan To Get Ahead
Depending on how many accounts you have open, it may be
worth your while to look into consolidating your debts with a personal loan. A
debt consolidation loan can help you pay off balances with high-interest rates
and make it easier for you to manage your monthly payments. If you’re juggling
multiple debts and can’t seem to get ahead because of sky-high fees, look into
a debt consolidation
loan today.