Poor financial decisions in the past can haunt your financial health today. If you had late or missed payments, high credit card balances, or even a foreclosure, this probably means that you have a very low credit score. A poor credit score gives lenders the appearance that it is a risk to lend you money. A low credit score can significantly affect the chances of having your loans approved, or even if credit firms allow you to, it is more likely that they will impose higher interest rates.
But this does not mean, however, that your past financial missteps can haunt you forever. There are several actions you can take to fix your credit score. Luckily, some experts at Fix Bad Credits outlined in this article the five simple ways on how to fix your credit score.
1. Review Your Credit Report
The best course of action in fixing any problem is to know the source of the problem. The same is true for fixing a credit score. You can only come up with the best strategies to boost your credit score if you know what’s pulling your number down. Thus, it is very important to review your credit report first before making any plans.
Your credit report contains your financial history and your credit score is determined by several factors, how payment history, your credit card balances, your credit utilization rate, and other things. By reviewing your credit report, you would know the factors that negatively impact your score. Is it because of missed payments? High outstanding balances? By knowing these, you can better plan ahead and adjust your financial behavior accordingly to fix the problem.
Another importance of reviewing your credit report is by going over it, you may be able to spot some mistakes or errors in the report that can be corrected. If there are items that are inaccurately reflected in the report, you should try to correct these. This is actually one of the quickest ways to increase your credit score.
2. Avoid Missed or Late Payments
Payment history is the most significant contributing factor in your credit score. Your payment history indicates how reliably you paid your bills in the past. If you have a poor credit score, then it is most likely because you failed to timely pay your debts in the past. In fine, the best way to actually boost your credit score is to pay your bills on time and try to avoid missed or late payments at all costs in your current obligations.
Late or missed payments can stay in your credit report for a long period of time. But you should also know that the effect of items of late or missed payments in the past diminishes as they age, and new items have the most impact. Thus, it is very important to make timely payments on your current bills or debts. They can have more influence on your credit score than those missed payments in the past. If you try to settle your current obligations responsibly, then your current credit score will likely increase and your past financial missteps won’t have that much impact on your credit score.
There are several ways you can do to make sure you avoid missed or late payments. One way is to take advantage of automatic payments, a feature offered by the majority of banks and credit unions. You can also try using payment reminders through your banks’ online portals. These ways can surely help you in paying your bills on time and eventually fix your credit score.
3. Pay Down Your Balance
Your payment history is important on how your credit score looks like but your credit utilization rate is equally important. This is determined by the amount of credit you have used and its proportion to the amount of credit extended to you by your lenders. If you want to have a good credit score, you might want to maintain a low credit utilization rate. So in order to lower your credit utilization ratio, you will need to pay down your outstanding balances. By doing this, your credit score will significantly improve.
In decreasing your unpaid debts, you have to strategize on how you will make your payments, which debts you should prioritize if you have multiple balances. It is optimal to pay first the debt with the highest interest rate than low interest credits. In this way, you won’t suffer any longer from high interest rates and you can save money that you can apply to your other balances.
4. Avoid Applying for New Credit
Applying for new credit within a short period of time can decrease your credit score. Applying for new credits creates a hard inquiry on your credit report and lowers your score. Therefore, if your goal is to fix your credit score, you should avoid applying for new credits because these hard inquiries can have a greater impact on your score and hinder your goal of bringing your credit score up.
5. Become An Authorized User
One way of fixing your credit score is to be added as an authorized user on someone else’s credit card account. If you have a relative or friend who manages his/her money very well and has a long record of responsible credit card use with a high credit limit, then you can consider asking him/her to add you to his/her card as an authorized user. This method has a significant impact in your credit file because when you’re an authorized user, the account will show up on your credit report. Your report will then reflect the cardholder’s great payment history and low credit utilization rate. With this, your credit score will rise up, too.
Having a bad credit can be dreadful, especially if you want to apply for a new loan. If you have a poor credit score and you want to improve it, then you can follow these simple steps to fix your credit and boost your credit score.
