Techniques to fix a low credit score can help you secure financing for a home and cars. Lenders have to review credit scores before granting a loan approval. Credit scores help lenders assess the risk of approving an application. People with high ratings are normally lower risks, whereas high-risk applicants are usually those with bad credit. Improve your credit score and become the ideal loan candidate.
Credit Card Balances
Paying off new credit card charges once you get the bills is key to eliminating debt and raising your credit score. The amount you owe makes up 30 percent of your credit rating, and restoring your low credit score calls for managing debt better and getting rid of high balances on your credit cards. Consumer debt isn't bad in itself. You need credit to build credit. However, responsible credit use and keeping balances low contributes to a high credit rating, whereas exceeding your given credit limit or keeping balances close to your credit limit harms your rating.
Timely Payments
Timely payments refer to paying your creditors or lenders when your bills are due -- and not a day later. Creditors tend to give a little leeway, and they might not report a bill that arrives days after the due date. However, they will report accounts 30 days past due, and having a 30-day-late remark on your credit report can lower your score. Good organization helps with timely payments. Keep all your statements in one place, and write due dates in a planner or on a calender. Pay early to ensure creditors receive the money before the cutoff date.
Check Credit Report for Mistakes
Don't allow inaccuracies on your credit report to ruin your chances of getting a mortgage loan or another type of loan. Check your credit reports at least once a year to ensure accurate updates (see Resources). Knowing what lenders are reporting helps you catch mistakes and problems early.
Re-establishing Your Credit History
If you don't have a credit score, or if you have an extremely low score following a bankruptcy, establishing or restoring your credit history reverses your situation. Credit scores are important, and while you may feel content with no credit cards or credit accounts, lack of credit can prevent purchasing a home or financing a car. Rather than shy away from credit, learn how to use credit wisely and rebuild your history. Start with a secured credit card from your bank. These have credit limits that are based on your security deposit, and they're easy to qualify for with bad credit. As you make bill payments on time and pay down your balance, branch out and attempt to get a small personal loan using personal property as collateral. Having different types of credit benefits your credit rating and helps repair bad credit.
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