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Easy Ways to Rebuild Your Credit

Rebuild your creditGetting serious about your credit and taking steps to boost your credit score increases your financing opportunities. You’re able to qualify for auto loans and mortgages, and with a high credit score, you receive the best interest rates on credit cards and loans.

It’s customary for lenders and creditors to check credit reports and credit scores before extending financing. This three-digit number says a lot about your creditworthiness and payment habits. If you’re approved for financing, creditors view you as trustworthy and someone who’s likely to repay his debt. But if you’re denied financing, this signals a problem that needs addressing.

Don’t give up and accept bad credit as a way of life. Rebuild your credit and enjoy easy approvals and low interest rates.

Pay your bills on time.

Being late on your payments and skipping payments is a credit score killer. Timely payments make up 35 percent of your credit score. Any delinquent payment, collection account or judgment can severely impact your credit score and close the door on financing opportunities.

Paying your bills on time is the most important factor in rebuilding your credit. Even if you can’t pay your credit card balances in full, always pay the minimum by your due date. This also applies to mortgages, auto loans, student loans and other loans. If you don’t have funds available on your due date, contact your lender or creditor and ask for an extension. Keeping the lines of communication open is key to maintaining a good relationship with creditors and protecting your score.

Get rid of your debt.

Timely payments can boost your score, but this isn’t the only factor in rebuilding your credit. The more debt you carry, the lower your credit score. Create a plan to eliminate as much of your debt as possible. Pay more than the minimum on credit cards and avoid new charges. If you have a mortgage or auto loan, consider bi-weekly payments. By making one half payments every two weeks, you reduce how much you owe in interest, which can shave several months off your loan term.

Stop applying for new accounts.

Too many credit applications also have a detrimental affect on your credit score. Don’t apply for credit needlessly. Credit applications trigger an inquiry on your credit report, and each inquiry deducts up to five points off your credit score. If rate shopping for a mortgage or auto loan, complete all your applications within a 14-day span. Credit scoring systems allow for rate comparisons and multiple inquires that occur within 14 days count as a single inquiry.

Check your credit report.

Recognizing mistakes on your credit report and quickly removing errors can give your credit score a jump. For example, a collection account, judgment or lien reported in error can significantly lower your score and stop credit and loan applications. Be proactive and take charge of your credit history. Order a copy of your report at least once a year from AnnualCreditReport.com. Read the report carefully and make a note of mistakes or unknown accounts. You can click a link on the website to dispute any credit report errors.

Filed in: Credit Help

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