With so many people struggling to catch up following the onset of the recession, bad credit scores are haunting those trying to qualify for loans or credit cards. Improving a devastated credit score can seem impossible when lenders are unwilling to take a chance on you, but there are plenty of things you can do to make your score more appealing.
Find out exactly where you stand by obtaining your credit report. Take a copy of it to a financial counseling if you need to. Whether you go it alone or with a professional, figure out what debts can be paid off quickly and see if there are any outstanding balances that were never paid.
Cleaning up any false information and paying off outstanding debts serves as a cleaner foundation from which you can begin building a better score.
Apply for a credit card, even if you cut them up in the past to avoid racking up debt. You need at least one low-balance card to help build your scores.
Even individuals with bad credit can qualify for some credit cards, although interest rates may be higher than normal.
The trick to building up good credit fast is to make minimal purchases every month with your credit card, then pay off the balance in full each month. This means only buying things you already have the cash on hand for.
Don’t bother with minimum credit card payments or tell yourself you’ll give it a few months. Pay it off completely each and every month. It will become second-nature after a while.
If you already have several credit cards and outstanding balances, come up with a plan to pay them down. Paying off auto or student loans can help your score, but not by much. Paying off a credit card will boost your score like nothing else can.
Continue to keep those monthly payments on all of your cards, but focus on the lowest limit credit card first. Double or even triple that monthly payment to see the balance dwindle faster. Once you’ve paid that one off, focus on the next lowest balance, until you’re working on that final high-balance card.
Once you pay off your credit cards, keep the balances low. Credit bureaus factor in high balances when determining your credit score, so flying under the radar really helps.
Focus on your savings account. Applying for a high-yield savings account will grow your money faster, giving you more room to pay down debts.
Having a decent amount in savings is also useful if you apply for a loan or mortgage but have bad credit. Oftentimes, lenders will consider your savings amount over the tainted credit and you’re more likely to be approved.
Once you’ve cleaned up past due accounts and paid down some debt, pay your bills on time. A bill that’s even a few days late will negatively impact your credit score, so don’t take that chance.
When you suspect you may have to miss a payment, contact the creditor right away to see if they will work out a deal. You may be able to make a partial payment or extend a grace period without it being reported to the credit bureaus.
Boosting your credit score is easy once you fix errors and settle old debts. Get in the habit of making payments on time, contribute to a savings account regularly and be persistent.
Article provided by moneysupermarket.com, the UK’s number one comparison website.