The key to qualifying for and securing the best interest rates on a credit card, mortgage, auto financing, or personal loan is a good credit score. But if you’ve discovered that you have a poor credit rating, don’t despair. Here are 5 steps you can take to fix your credit scores in both the long and short term.
Break bad habits
The first step – which is perhaps the most important one – is to turn over a new leaf with regard to your financial matters. That means reducing spending and committing to paying off debt. That may mean taking a second job or working additional hours, and you might have to make sacrifices, but in the long run it will be worth it.
Make payments on time
One of the top considerations in determining your credit scores is how timely you are with paying your bills. One way to make sure your bills are paid on time each month is to pre-schedule automated payments through your bank or with the creditors themselves. However, you must make sure you have enough money in your account to cover these payments. Whether you use automatic payment options or send your payments out yourself each month, just make it your priority to pay your debts in a timely manner.
Clear up derogatory marks
If you’ve ever had a debt that has gone into collections, or if you’ve filed bankruptcy, or if there have been any legal actions regarding your finances, these events will show up on your credit report as derogatory marks. If you have a mark like this on your report, contact the creditor and arrange to pay the outstanding amount in full – but first make sure you will get a written statement from this creditor that they will remove the derogatory mark from your credit report once your financial obligation is satisfied.
Pay down balances and keep unused credit card accounts open
One of the factors used to calculate your credit score is utilization, which is the amount of credit that is available to you. Generally speaking, the more available credit you have that you aren’t using, the higher your credit score. If you pay off a credit card entirely, keep the account open (even if you don’t plan on using it) to show that that credit is available to you.
Consolidate your debt
If you find that your debt is unmanageable, it may be time to consolidate. Doing so will help you to avoid late and missed payments by making one blanket payment to cover your outstanding debt. Keep in mind that while there is no quick fix for creditworthiness, with the right attitude and good habits, over time you can rebuild your credit and prove to creditors that you are fiscally responsible.
Don’t stop once your score is fixed. Ensure you keep your credit at it’s optimal best by following these credit score tips from the home loan experts at Cliffco Mortgage Bankers.