Having bad credit naturally makes it more difficult to get additional credit. Your credit score tells lenders how likely you are to repay them if they give you a credit card or cash. If your score is low, you may not qualify for the credit, or the interest rates may be really high. It is, therefore, in your interest to get your score up. This will take time but the sooner you start taking the right steps, the quicker your scores will go up. Here’s what to do.
Keep your credit card balance low
Potential lenders will take your credit utilization ratio into consideration. This is calculated by totaling your credit card balances and dividing the sum by your credit limit. For example, if you usually charge $1,000 each month but your credit limit is $5, 000 across all your cards, your ratio is 20 percent. You can calculate your monthly average by looking at your statements over the past 12 months. Banks and other lending institutions usually like to see ratios of 30 percent or lower. This tells them you haven’t maxed out your cards. If you have bad credit but still want a credit card, there may be an option to help you get back on track. Be sure to learn your options.
Make bill payments on time
Your track record of paying your bills is used as an indicator of how likely you are to pay on time in the future. If you want lenders to look at you favorably, you need to show you can pay your bills when they are due. Paying late or paying less than the full amount can negatively impact your credit score. Utility bills and car loans will be considered along with credit cards. Late or missed payments can stay on your record for up to seven years but their impact decreases over time.
Pay your credit card bills at the right time
Ideally, you shouldn’t wait until your payment is due to settle your bill. The credit card company will report your balance to the credit bureau once per month, usually on the statement closing date or right after. Depending on when your balance is reported, you may seem more high risk than you really are. If you want to raise your credit score quickly, pay your bill as soon as possible after it is issued so the credit card company reports the lower balance.
Get your rent added to your credit history
Your history of rental payments isn’t typically included in your credit score but if you’ve been paying faithfully for years, you should get it added. This data can boost your rating by ten to 20 points in about a month. You will need to ask your landlord to verify that you’ve been paying your rent on time and a third-party company will have to supply the information to the credit bureaus.
You won’t immediately get an excellent credit score if you’ve been making poor financial decisions for years. However, if you use the tips above, you can quickly get back on track. A bad credit score doesn’t have to ruin your life.