Have you ever been turned down a personal loan or a mobile phone contract because of bad credit? Have you ever been charged a higher interest rate on your loans because you were considered a high risk borrower? You are not alone in your dilemma. Thousands of other consumers who have bad credit are experiencing the same thing. At the end of the day, there’s also only one best solution to your problem. Boost your credit so you’ll more freedom financially. To help you do just that, here are some tricks and tips you can take advantage:
Understand how credit rating works
Contrary to popular belief, there is no such thing as universal credit rating. Just because one provider rejected you doesn’t mean other providers will. Remember that lenders may use a different credit scoring than other lenders which means you are better off focusing on how credit scores are formulated rather than the scores itself.
No matter which scoring model is used, credit scoring generally depends on a few key factors which include your payment history, amount of debt owed, length of credit history, new credit and types of credit used. Keeping these factors in mind are important if you want to boost your credit score.
Review your credit report
Before anything else, one of the first things you need to do is review your credit report for errors and inaccuracies. In fact, you’d want to check your files on a yearly basis from here on. Errors can happen though rarely and if it happens to your files, it can affect your application. Make sure you do this first and report any errors as soon as possible if there are any.
Focus on paying your bills on time
The next step is not going to be easy but something you need to do nonetheless. You need to commit to pay your bills on time and consistently for at next 12 months or longer. This includes your utility bills and especially your credit card bills. Stop paying just the minimum. Instead aim to pay your credit cards in full if you can or just a bit more than the minimum required payment.
Aim to reduce the amount of debt you owe
To further boost your credit score, you’d also want to aim to reduce the amount of debt you owe especially when it comes to your credit cards. Start off by paying off the ones with the highest interest rates first then go from there. While you’re reducing your debt, you’d also want to minimize using them for the time being. Use your cards occasionally and only for important purchases.
Use credit cards to build your history
Closing your unused credit cards is highly discouraged because doing so may actually lower your credit score. Just use your older credit cards from time to time to build your history. As a rule of thumb, keep your charges to 30% or below of your credit card limit. This way, paying for your dues at the end of the month will be more manageable while you’re still building your score in the process.