You can greatly improve your credit score by employing the strategies detailed below.Your credit score plays a big part in determining how much you pay for loans, what your interest rates will be and whether you not you are approved for credit.
More than half of all Americans have a subprime credit score. If you’re among them, then you need to work to improve it. Here are a few ways you can do that.
1. Work on your credit report
You should start by getting your credit report from AnnualCreditReport.com
. There, you can choose one of the three major credit bureaus to get a report from. These are TransUnion, Experian and Equifax, and you are entitled to one free report from each of them, every year. Print yours out, or save it somewhere so that you can work on it.Look through the report with meticulous detail
, being sure to note any potential errors you find. You should also note any trouble areas on your report, such as missed or late payments.By keeping your report clean from errors and negative marks, you can not only improve your credit score but also improve your chance at employment. Many employers will look at a credit report before making a hiring decision.
2. Work on those balances
FICO is responsible for calculating most credit scores, and almost a third of that score comes from how much money you owe.
The amount you owe isn’t what’s important. What matters is how much you owe compared to the amount of credit you have available.
The ratio of the two is called your credit utilization ratio
. An available credit limit of $5,000 with a $2,500 balance would mean that your credit utilization is 50%.What the best credit utilization ratio is hard to say, but we do know that anything below 30% puts you in the favorable range.
When you go higher than that, you need to get your balances down quickly. It may help to find a second job or pick up some other source of income that can assist you in dropping those balances down to an acceptable level.
3. Pay bi-monthly
If you pay off your credit cards each month, you may think you are doing fine and keeping a great credit score, but if you max them out each month and pay them off just before they are due, you could be seriously hurting your score
.That’s because the credit bureaus take a snapshot of your balances, and if you get close to your limit each month, it can look like you are not being too careful with your credit.Let’s use an example of a rewards card that has a $1,000 limit. You would likely use this card for most everything, since you get rewarded for your purchases. If you get close to the balance, and the credit report shows that you have a nearly full balance every month, it looks like you aren’t paying off that balance. That leaves you with a nearly 100% credit utilization ratio.If you want to change the way the credit bureaus see your credit usage, then you need to pay more often.
By paying off purchases right away or at least a few times per month, you can keep your credit utilization ratio low.
4. Add to your credit limit
You might not be able to pay off or even pay down your balances, but you can still make your credit utilization ratio look good. All you have to do is contact your creditor and ask them to increase your credit limit.By increasing your limit, you can make a huge impact on your credit utilization ratio.
If you double your limit, you have halved your credit utilization. Of course, it won’t do you much good to increase your limit just to start spending way more than you used to. It ruins the whole point.
5. Get a new credit account
Your current credit card provider may not want to give you a credit increase. If that’s the case, then you could benefit from opening a new credit card account.
This can increase your available balance and help your credit utilization ratio.Your credit utilization ratio applies to all of your accounts and cards, and isn’t restricted to just a single one, so opening more accounts can help your credit score.
However, if you open several accounts at once, it can look bad on your credit report. It shows that you may not be very frugal with your spending, so you only want to apply for one or two cards if you go with this method.
6. Try to work on any outstanding balances you have When you have bills in collections, your credit score can suffer severe damage.
You may not be able to erase those from your credit report, but you can do some damage control.You can try to negotiate your debt and get it paid off faster
or simply decreased. You can also try selling some things or getting another source of income to pay these debts off faster.
7. Get an authorized user account
Maybe none of these strategies work for you. In that case, you may want to try adding yourself to someone’s account.
You can find someone you trust and ask them if they will allow you to be added to their credit card. That way, your low credit won’t matter, and you can work on your credit score using your friend’s good standing. Just know that they will be doing you a huge favor and putting themselves at risk
, so be sure that it is someone you trust, and who trusts you.The account will be in your name, and you can work on boosting your credit score as you play it safe on someone else’s account.The strategies outlined above can help you boost your credit score, but they won’t work very fast. You have to give it time before you can see some serious results.Most people have to wait about three months before positive change happens.
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