Follow These 10 Tips To Repair Your Credit
Most people will need a loan at some point in
their lives, whether it’s to purchase a home, car, or even pay for a wedding. A
great credit rating is the key to being approved for a loan – if you possess a
solid credit rating, the odds of a lender extending credit to you is almost
But what if past mistakes have decimated your
credit? What if lenders grimace when viewing your credit report and turn you
away each time you are seeking a loan? Without a doubt, a poor credit rating
will severely limit your ability to obtain financing.
Luckily, there are many ways to repair your
credit. All you need is time, discipline, and perseverance. If you want to know
how to rebuild, here are 10 things you can do right now.
10 Ways To Improve Your Credit
Use some of these tips below to improve your credit:
- Pay Your Bills On Time
- Make at least the minimum payment
- Check your credit report for errors
- Pay down your debts and bring your accounts up to date
- Create a budget
- Keep your credit card balance low – but not too low
- Increase your credit limit
- Build a payment history with a secured credit card
- Get negative details removed from your credit report
- Contact a credit counseling service for help
Pay your bills on time
One of the easiest ways to begin fixing your
credit is to ensure your bills always get paid on time. Missed and late
payments have adverse effects on your credit score, so timely payment of bills
is crucial (your payment history accounts for about 35% of your credit score).
If timeliness is not your strong point, consider setting automatic payments –
that way you’ll never forget to pay a bill again.
Make at least the minimum payment
If paying off your credit card balance in full at
once is not realistic for you, strive to at least make the minimum payment on
time. This is a great way to repair your credit and establish a reliable track
record. Paying something consistently and on time is better than paying nothing
Check your credit report for errors
It’s possible that your credit rating may be low
partly due to errors. This is why it’s critical to obtain a copy of your credit
report and scrutinize it – you may discover errors you otherwise would have
never known about. If you find something that’s inaccurate and suspicious, make
your creditors aware so they can revise the status of your account.
Pay down your debts and bring your accounts up to
Make arrangements to pay down as much debt as you
can. Contact your creditors to try and negotiate a payment plan that will be
manageable for you. If you’re not able to bring your accounts up to date at
once, they may be open to creating a plan that will work within your budget.
Credit utilization is an important aspect of
rebuilding your credit. For example, if you’re credit limit is $10,000 and
you’re using $8,000 consistently, your credit utilization is 80%. Your goal
should be to reduce your credit utilization to under 50%. Ideally, it should be
35% or lower.
Create a budget
While a budget won’t directly improve your credit
score, it can act as a check on your spending. One of the key reasons people
end up damaging their credit is because they have fallen into the bad habit of
paying for things they cannot afford, first by depleting their chequing account
and then resorting to credit cards.
If you’re not sure where to start, consider
giving the 50-30-20 budget a try. This popular budget divides your after-tax
income into three categories: 50% needs, 30% wants, and 20% savings and debt
payments. With some discipline and planning, you can learn to make financially
prudent spending decisions and curb bad spending habits.
Keep your credit card balance low – but not too
Maxing out your credits on a consistent basis and
not paying them off is not good practice – credit bureaus keep tabs on
how much credit you use and compare that to how much you have available.
Instead, use your credit cards to make more
frequent smaller purchases, taking care not to use up too much of your
available credit. The foundation of good credit is built on your ability to use
credit and pay it back on time, which indicates to credit bureaus that you are
responsible when it comes to your finances.
Increase your credit limit
If you’ve gained some traction in implementing
good credit practices, consider upping your credit limit. The goal is not to
gain access to more credit so you can reward yourself with a spending spree,
but to lower your credit utilization, thereby increasing your credit score.
Build a payment history with a secured credit
If you’re not at the point where you can have
negative information removed from your credit report than consider applying for
a secured credit card. A secured credit card functions like an ordinary credit
card, with the exception of a security deposit. In order to use one, you will
be required to put down a prescribed amount of money as collateral, assuring
your creditors that you will pay back any money you use on the card. Once you
establish a reliable payment history, you can ask for an unsecured card.
Get negative details removed from your credit
If your credit score is in poor standing because
of collections reporting, you may be able to improve it by paying off the debt
that is being pursued by collection agencies and then asking them to remove you
from their list of flagged accounts. You can find these types of collections
under the public records section of your credit report.
Contact a credit counseling service for help
If you’re done everything within your power to fix your credit score but still need assistance, talking to a credit counselor may be beneficial. Credit counselors are professionals who can help devise a plan to get your credit back in good standing. They can advise you on a debt consolidation plan (a plan where you merge all your payments into one monthly payment), provide educational workshops on money management, and help you settle debts with creditors by negotiating a reduced payment amount. If you’ve damaged your credit and are seeking to rebuild it, following these suggestions will help set you on the right path. Reviving your credit score takes time and patience, so start slowly and do what you can. While there is no magic formula that can swiftly repair a poor credit standing, rebuilding it – even after bankruptcy – can be accomplished.
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