No one enjoys being in debt, but it’s almost impossible to make it in today’s economy without some assistance from credit cards, school loans, or car loans. Unfortunately, acquiring financial aid by way of credit is difficult when your credit score is too low. While there’s not really a quick fix for raising your credit score, there is hope. Below, you’ll find a few tips to help you slowly rebuild bad credit and look more appealing to lenders should you need them.
Don’t be Late
No matter what steps you take to build up your credit score, none of them are more important than making timely payments. Your credit score is a number that is determined by several different factors, but the largest contributor is credit history. Late or missed payments can negatively affect your score for years, making you look untrustworthy to potential lenders. So, first things first, make sure you always pay on time. If you’re forgetful, set up automatic payments to ensure your cards are never late.
The More the Merrier
Speaking of payments, if you can manage to pay multiple payments each month, do it. Implementing this credit score trick doesn’t necessarily mean you have to pay more than your minimum amount due, it simply means that you pay several small payments throughout the month instead of making one large payment on the day that it’s due. Why does this matter, you might ask? The answer is simple; it keeps your credit utilization lower. Aside from late payments, one of the most common reasons your credit score might drop, or stay low, is because you’re using too much of your overall credit limit at any given time.
Typically, you want to keep your credit utilization at 30% or less. The lower the better. So, by making several small payments throughout the month, you keep your credit utilization in check, especially if you’re still using the card you’re paying on. Just make sure that your total minimum amount due is paid by the due date.
Ask for More
Another helpful trick if you’re wanting to raise your credit limit is to call and ask for a credit limit increase on your credit cards. Keep in mind, you’re not asking for this limit increase so you can spend more money. The only reason you should ask for a limit increase if you’re trying to increase your credit score is because it will cause your overall credit limit to rise, which causes your credit utilization to go down. And, as explained above, when your credit utilization is under 30%, it will positively affect your credit score. If you’ve increased your income or made positive steps towards paying off your debts in the past several months or years, there’s a good chance creditors will oblige and raise your limits.
Don’t Close Your Accounts
If you pay off a credit card, congratulations! Celebrate that, but, if your card isn’t charging you an annual fee, don’t close the account. It’s easy to believe that it might look better to creditors to show that you paid off a card and closed the account, but all that matters is you don’t carry a balance on the card. Closing the account will cause your credit limit on that card to no longer be factored into your revolving credit, which means your credit utilization will suffer. Doing what appears to be a good thing could actually hurt you in the long run. If you feel like you’ll be tempted to use the card if you keep it open, you can always hide it or cut it up to prevent further spending.
Limit the Number of Cards You Apply For
This blog has talked a lot about credit utilization, but that doesn’t mean you should go out and apply for several cards in order to increase your overall credit limit. Each time a creditor does a hard inquiry on your credit, your credit score will suffer. Not to mention, other creditors typically don’t like to see that you’re applying for multiple lines of credit at the same time. It’s a huge red flag, and you might get rejected.
Trying to raise your credit score might seem daunting, but it’s not impossible. Take the necessary steps, keep an eye on your credit reports, and be patient. If you continue to make smart decisions, your credit score will reflect your efforts, and eventually you’ll have a credit score you can be proud of.