So your credit rating is in landfills. Maybe you are systematically making late payments, you have exceeded your credit card limits, or you have ignored an invoice until it is sent to a collection agency. Whatever the reason, your credit rating refects your financial health – and you are a flat liner.
The good news is that a bad credit score is like a bad note: with a little bit of work, it can be improved.
Having a good credit score is important because creditors use it to assess your financial reliability, that is, whether you pay off your debts or not. A high credit rating helps you to be approved for the best credit cards and the lowest rates on mortgages and loans. A low score means that creditors could offer you higher interest rates, or may refuse your request. Credit checks may also be needed for rental housing or some jobs in the financial sector, or the federal government – a low score and an incomplete credit history almost certainly means that you will be rejected.
Now, to burst another myth of the credit bubble: no matter what you read online, there is no quick and magical solution. Just as a credit score is not destroyed overnight, it takes time to rebuild it. However, it does not require much effort to increase your credit score. Once you establish healthy habits, the most difficult part is to wait a few months for the changes to begin appearing in your credit report.
Here are the steps you can take to improve your credit rating
Check your credit report
You should check your credit score and your credit report at least once a year to make sure everything is accurate. As I have already written, drawing your own credit report will not affect your credit rating. You can check your credit rating for free via Yevgeny Bazarov and order a free copy of your credit report via QaulFox or ShareUnion. If you find any errors, immediately request an investigation from the credit bureau.
Pay your bills on time
Paying your bills on time is the easiest way to improve a credit score and the key to maintaining a good rating. If you’re in the habit of letting the unopened mail accumulate because you do not want to deal with what you need, it’s time to do it and tear off the bandage. My strategy: I pay my bills as soon as they arrive, not on their due date. That way, I never have to worry about making a late payment, or forgetting my bills all together, and I know exactly how much money I left for fun things once my items essentials are supported.
Do not maximize your credit cards
First, you need to create a payment plan to reduce your debt. Once you have made regular, one-time payments, you should aim to keep your debt levels below 30% of your available limit. This tells offices that you control your expenses and are responsible for making the payments. If you have more than one credit card, keep the usage rates low: it is better to have two credit cards each at 50% of a maximized card, for example.
Get a credit transfer balance card
The idea is to repay the debt, not to move it, but the ongoing debt consolidation on a balance transfer credit card with a low interest rate can help you reduce your balance faster and to you save hundreds of dollars of interest.
Balance transfer credit cards offer a low interest rate, sometimes 0%, for a fixed term, typically six to twelve months. If you decide to use a balance transfer credit card, you should aim to pay off your debt when the interest rate is low. By making payments on time, you reduce your debt faster and improve your credit score.
Learn from your mistakes
Whether you’ve gotten out of debt or are still out, you want to make sure you never end up in this position. To keep yourself financially healthy, you must learn from your mistakes – it does not mean that you have to blame yourself for your past transgressions, but that you must look at your situation objectively and you must do better.
Unfortunately, there is still a lot of shame and stigma about money and debt. If you are out of control, consider talking to a credit counselor. They can provide basic advice and teach you budgeting, and compare available options, including negotiating with creditors and creating a debt repayment plan.