You may not be aware of it, but your credit score plays a crucial role in your overall financial well-being. It can help you get loans at decent rates of interest. You can also qualify for other credit cards and enjoy easy access to funds when you need them.
It is important to know that there’s no way to raise your credit score instantly. Your credit score is directly linked to your credit report. The credit report has information that your lenders send to the credit bureau. These reports are sent once a month. Over time, you will start to see your efforts pay off.
If your credit score is less than impressive, you need not worry. You can fix your low credit score problem by following these tips.
Make Card Balance Payments Strategically
The credit limit portion you are using is called “credit utilization.” Make sure you use around 30 percent or less of your credit limit on any card to keep your score higher. Smart credit users keep their utilization low.
They also ensure that the balance owed is low when the issuer reports payment details to the credit bureau. Pay the balance and keep it low before the billing cycle ends. You can also make small payments throughout the month to keep the balance low. As soon as the credit card reports a lower balance to the bureaus, it will help improve your credit score.
Use a Secured Credit Card
Using a secured credit card is another effective way of rebuilding your credit score. The best ones come with features that help you stay on top of what influences your credit score. When you use it regularly and pay it monthly, it can help you improve your payment history. It also increases the length of your credit history over time. This is the best way to add a more positive credit history and dilute past payment lapses.
Look for a secured card that reports your credit activity to all major credit bureaus to maximize the benefits. It may take some months before your efforts pay off. However, a secured card can help you build a steady record of low balances and timely payments.
Make Timely Bill Payments
Making late payments on your bills will continuously lower your credit score. No credit repair strategy can work in such cases. Late payments can stay on your credit reports for as long as seven years. If you miss making a payment for 30 days or more, try and make the payment as soon as possible.
Inform your credit card company about the payment. They may update your payment immediately, and the missed payment will not be reported to the credit bureaus. Remember, every time a credit report is marked as delinquent, it can damage your score.
How fast your timely payments will improve your credit score will depend on the number of missed payments. It will also depend on how late the payment was made. While delinquent payment reports fade with time, you can speed up the process by adding more positive credit accounts.
Create a Good Mix of Credit
It might seem counterintuitive, but getting an additional account can help repair and improve your credit score. It is even better if it’s a type of credit you don’t have already. You can even consider taking a loan.
A low-cost credit-building loan that reports to all the credit bureaus can help accelerate the credit repair process. Apart from improving the credit mix, a new credit card or a loan can boost your overall credit utilization. It provides more credit options and easy credit availability.
This option works best if you have only credit cards or short credit histories. As soon as the new account is detected and its activities are reported, it can start to benefit you.
Look For and Fix Credit Report Errors
Even a small mistake on your credit report can pull down your score. If you are aware of such errors, make sure you get them fixed promptly. It can help improve your credit.
You need not spend money to access credit reports. You are entitled to get a report for free once a year. Request a detailed report and check for mistakes in reporting. The most common mistake is marking late payments even when you have paid on time. The credit activity of someone else may get mixed with yours at times. Bureaus may also include negative information that’s too old to be listed.
Once you have identified errors, dispute them and follow up regularly. It takes some time for the bureau to respond since they will do a detailed check. However, the process is worth your time if you are building your credit. Generally, bureaus respond within 30 days to your complaints.
Most of these tips can help you build credit fast. In most cases, you will see an impact on your score within a month or so. Those with a low credit score can make better gains than someone with a good credit score. The pace of improving your credit score will also depend on what’s pulling it down. If you stick to good spending habits, you can add up to 100 points to your score over time. Develop positive credit habits such as paying on time and using the minimum of your available credit to get you there.
