Five Ways To Improve Your Credit Score If It Is Below 700
HAVING a bad credit score can be difficult for many reasons, but be aware that there are a few smart steps you can take to improve it.
Namely, a bad credit rating makes borrowing more difficult. It could affect your next car loan or mortgage.
While you can get approved for a loan, a low credit score could result in a higher interest rate.
In the past, you might have made mistakes such as not making a payment on time or having high account balances.
Below we show you several ways to improve your credit score, assuming you have less than 700 points.
Contact your lenders
If you’ve made mistakes in the past, the first thing you need to do is own up to them. In that case, you’ll want to write them a letter.
Besides holding yourself accountable for your credit history, let your lenders know about your plans to make sure your credit rating doesn’t drop any further, and if you’ve been a customer for a while, add that as well.
In your post, you’ll also want to include an account number, the date you missed payments, and other notable information.
This could help you eliminate missed payments from your credit history.
Make small but timely payments
After pleading with creditors, you don’t want to go back to the days of high balances and missing payments.
To avoid this, make several small payments per month. Not only are you keeping your balances low, but you are increasing your credit rating.
It doesn’t directly improve your score, but you’re more likely to pay more than the minimum owed, which means your balance will go down faster.
You’ll also avoid late payment fees, which will increase your score over time.
Use multiple credit cards
A common mistake people make when trying to improve their credit rating is allowing too many fees to pile up.
According to experts, you shouldn’t use more than 30% of your available credit.
To navigate around this, you can try making the payments or using another card.
You can also try asking for an increase in your credit limit if you continue to exceed 30% of your available credit.
Whichever option you choose, make sure you don’t apply for a lot of credit cards at once, as it will do more harm than good.
And no matter how many credit cards you have, the basics of keeping balances low and always paying bills on time still apply.
Be added as an authorized user
To be eligible for this step, you’ll need someone to add you to their credit card account.
This means that you will have a card issued in your name which is linked to the primary cardholder’s account.
Of course, this person will need solid financial background to make timely payments. This person can be your parent, relative or close friend.
But whatever, that person trusts you enough to put their credit rating on the line.
And yes, if you miss a payment or accumulate large balances, the primary cardholder might see negative changes in their credit report.
But nonetheless, as long as you make payments on time, it could be an effective way to boost your credit score.
In just three months after becoming an authorized user, people saw their credit scores improve by 11%, according to a 2018 study by Credit Sesame.
Transfer Debt to a Consolidation Loan
Perhaps the most effective step you can take to improve your credit score is to get out of debt.
But it’s not always that simple, especially when you have to pay back thousands of dollars to multiple lenders.
If this is the case, you can try taking out a debt consolidation loan, that is, when several debts are collectively transferred into a new single loan.
As part of a debt consolidation loan, you may be eligible for a lower monthly payment and / or a lower interest rate.
This will help you pay off your debts much faster and you will only need one big payment.
For some, debt could be a deciding factor in their credit rating. According to reports, what you owe determines 30% of your credit score.
Last week, The Sun spoke to Jen and Travis Smith about how no-spending challenges helped them pay off $ 78,000 in debt over two years.
We recently explained four important steps you can take before refinancing your home.
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