Credit scores and credit reports reflect how well or poorly you have managed your finances. If your credit report shows negative information, it becomes critical for you to get rid of any unpaid debt. Otherwise, you may be charged with an exuberant amount of interest. If your credit report shows terrible reviews of your financial behavior, obtaining credit from other creditors will be difficult. You may still get some credit if you collateralize it with a property or an asset. But, if you don’t own any valuable assets to use as collateral, you will not be eligible to get any form of credit, which leads to a worse financial situation.
Your only option is rebuilding your credit to eliminate bad credit scores. Improving your credit score will help you get approved for loans or credit cards, and, as a result, you will be rewarded with better interest rates. A bad credit score equals or below 619 per the FICO score. Follow the mentioned steps below to get your credit score back on track.
Review your Credit Report
Make sure to review your credit file so that you know your financial position. Doing so will give you a better idea of what points need improvement. Do you have late or missing payments? Is your credit file showing that you have a higher rate of debt-utilization? Reviewing such information will help you formulate a plan on where to start to improve your credit score.
You also need to check your scores to know whether errors or inaccurate payment details are present without your knowledge. If yes, then dispute the problem and get those debts removed, which will automatically improve your score. FTC offers great rewards in case of any dispute, which will help you rebuild your credit score.
Catch your Payments
Your payment history has a significant effect on your credit report. If you fail to meet your payment deadlines, it will not improve your credit score. You will only be making it much worse. If you find making your payments on time challenging, you should contact your creditors to get a more suitable payment plan.
Be up-front when contacting your creditors and explain your whole scenario. Let them know that you still want to pay for your responsibilities. You can also request services from a credit counseling agency to make a proper payment plan.
Pay your Bills on Time
You can slowly rebuild your credit by paying your bills on time. This also includes paying non-credit card bills such as utility, phone, internet, etc. Late rent and missed utility payments are reported directly to credit bureaus. Payment history helps you to establish a reliable pattern to improve your score. Ensure you are not falling into the bad habit of making late payments. If you can make automatic payments from your bank account, utilize this so as not to miss any more future payments.
Avoid Closing Credit Card Accounts
Avoid closing your credit card accounts, whether you use them or not. The longer your credit history, the better it is for your score. However, if you are far behind on your payment deadlines, the only option you are left with is to get a payment plan. A payment plan is required to cancel your credit card account. But make sure to track the history of your credit score to rebuild it.
Pay Down Debt
Credit utilization is another factor to consider to improve your credit score. Credit utilization is a way to measure how much debt you have expressed as a fraction of the available credit you use. For instance, if you have an open credit of $10,000 and only use $7,500, your credit utilization is 75%. It would help if you planned to pay off your debt more rapidly by using credit utilization. Reducing your debt will help you to improve your credit score.
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