Bad credit score can be a problem. You will find it harder to obtain credit from major loan providers, which never fail to check on borrowers’ credit histories before approving any loan application. Aside from that setback, most loans, mortgages, and insurance products get more expensive. Interest rates applied to those are higher if the individual has poor credit because of the consideration to possible higher risks.
Having a bad credit score can be a tragedy. But it does not come from nowhere. Poor credit is the result of careless, undisciplined, and ineffective management of debt and financial obligations. Fortunately, anyone with bad credit history can still improve it. Here are five recommended ways that will help you manage or improve your credit score. These may not be overnight solutions; these may take some time but the effect will be for the long-term.
- Pay off your debts. Are you aware that your debt level accounts for about 30% of your current credit score? That is why if you can start paying off some if not all of your debts now, you can soon improve that segment of your credit history sooner. If you do not have enough cash to pay off your debts immediately, you may sell some of your assets or contact your creditors for discounts or terms reduction/adjustment.
- Consolidate your debts. Are you having trouble paying and maintaining most of your debts? Your credit score will take a slow improvement unless you get rid of those. Through debt consolidation, you can repay all of those debts at once through obtaining a bigger one to do so. In the end, you will obtain and repay just a single debt with lower interest rate and other charges.
- Reduce your credit card expenses. According to some experts, bad credit score is mostly due to missed payments, high outstanding balance, and continuously accumulating interest charges on credit card debts. It is time you assess your credit card spending. If your credit card debt is bigger than your regular income, it is time you do drastic measures to make your credit card expenses match your income.
- Pay at least the minimum required payment on your debts. That is better than paying nothing at all. If you cannot repay your debts at once, at least try not to incur penalties, which also affect your credit history score. It may take much longer to repay a debt just by paying minimum payment amount each month. If you have extra cash, try to pay more so you can lower the principal that incurs interest. Also avoid making delayed or late payments.
- Always monitor your credit report. By doing so, you can keep track of your expenses and at the same time catch any fraudulent, inappropriate, or inaccurate charges that may have been added to your outstanding balance. Immediately contact your creditors if you find any discrepancy on your credit or debt account. Be sure changes and corrections also reflect on your credit history.