Bad credit can be a burden for the rest of your life if you let it. Running up large credit card bills or failing to make payments on your loans can damage your credit score and make it difficult to borrow money when you need it.
Here are a few tips to help you improve your credit score and take your life back:
Start with a plan.
Develop a plan of attack for how you will eventually pay off your loans. Loans work essentially the same way across the board, but let’s look at credit card payments specifically. Each month a minimum payment is due. In order to cut down on your credit, you will have to pay more than the minimum payment each month.
This minimum is essentially only paying the interest the credit card company charges you. You will need to come up with a way to supplement your income to pay significant credit card bills to whittle away at your credit.
Pay on time.
Bills that are past due kill credit scores. When you start paying bills that are past due, you immediately improve your credit score. If you have bills that are past due, start with them first and pay them off as quickly as you can. Taking other loans out to pay overdue bills can be very helpful is managed correctly.
Read your loan statements.
Become a student of your loan terms. Read your credit card stipulations carefully. If you find that the company is charging you an interest rate that is higher than the one you signed up for, call the company and complain.
Sometimes creditors skirt the law and try to raise interest rates. If you see errors on your credit card report, dispute them. Know the ins and outs of your loans so you can dispute the terms if you find errors. Sometimes opening a dialogue with your creditors can yield for favorable terms as well.
Build & Maintain a Long Credit History
Financial institutions and other decision makers are more apt to trust you if you have a long track record of responsible use. Having positive information about recently-opened trade lines in your credit reports will help, but without a more extensive track record, the question of whether or not these positive habits are sustainable remains. For all you fantasy football players out there, you can think of this like a second-year running back who had a great rookie campaign. Will the player keep it up in year two, regress, or even find himself in a situation that’s not conducive to performance? It’s hard to tell, at least as compared to a veteran who’s never missed a game and has displayed steady production over the years.
“The best way to improve your score is to use credit responsibly,” says Cynthia Saltzman, head of the Department of Economics at Widener University. “Some advisors recommend that you have a revolving account (credit card) and you do not charge more than 30 to 40% of your credit limit, with 10% being even better. Some advisors recommend that you have a revolving account and an installment account in which there are no missed payments. The bottom line is that you need to establish a good credit history, and of course, that takes time.”
Source: cardhub.com (@cardhub)
Reduce your credit card or line of credit balances to below 75% of your limit.
If your low credit score is due to having maxed out credit cards or very high balances on your revolving debts (e.g. line of credit or credit cards), this can be fixed as quickly as you can bring your balances owing, down to below 75% of your credit limits (below 50% is best). About a month after you pay down your balances (and keep them there), your credit score should rebound as long as you don’t have any other negatives against you, like late payments.
Review Your Current Credit Files
It’s essential for you to focus your attention on analyzing your credit profile. You should begin by learning where you stand to improve your credit.
Ensure to obtain a copy of your credit report every year from the three credit bureaus that offer them free of cost. You can also get your free credit report copy if you are refused credit or job based on details mentioned in your credit report. A few creditors may only inform one or two credit agencies instead of all three. Therefore, it’s necessary to request for credit reports from all three sources to acquire a complete picture of where you stand.
Once you get your credit profiles, mark the entries that are negatively affecting your present scores and gear up to prioritize.
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