Over time, there are several factors which can contribute to a poor credit score. Whether it’s been a couple of missed payments or you got into a situation where you borrowed a little too much, a bad credit score can stand in your way of financial freedom and make obtaining credit more difficult for you in the future. However, the good news is that there are several things that you can do to improve your credit score and get back in the financial good books once again. Read on for our top tips!
Tip #1. Pay off All Debts:
Before you can start to think about improving your credit score, the first step to take is pay off all your existing debts. As long as you have existing unpaid debt in your name, it’s going to be difficult for you to get your credit score to start moving upwards. To start off with, look at any smaller debts which are going to be affordable for you to pay off straight away. Then, move on to any larger debts and come up with a plan for paying off as much as possible per month to start reducing them as soon as possible. It’s certainly worth paying off debts before saving money or making any big purchases.
Tip #2. Rebuilding Credit:
Once you’ve paid all or most of your existing debts off, it’s time to start looking at ways to rebuild your credit score. To do this, you’ll need to responsibly use credit products to show lenders that you know what you’re doing when it comes to managing your money. For example, you may want to use a credit building credit card with a small limit to pay for essentials each month and make sure that it’s paid off in full as soon as it’s due. Getting into a regular habit of doing this will start to improve your credit score in no time.
Tip #3. Bad Credit Finance Products:
While it’s a good idea to try and avoid borrowing any extra money before rebuilding your credit score, there may be times where it’s impossible for you to consider any other option. For example, if you need a new vehicle and can’t afford to purchase a new one outright, borrowing the money may be your only way forward. Some companies will offer specialized auto finance for people with a poor credit rating – see Apply and Buy for more information. You can use this kind of financing to improve your credit rating as long as you make all payments on time.
Tip #4. Limit Borrowing:
Although it can be tempting to borrow more when you see your credit score getting better, bear in mind that doing so can be putting you at risk of ending up in the same situation once again. Instead, get into the habit of borrowing as little as possible; a manageable amount of credit that’s used responsibly is the best way to achieve a high credit score.
If you found these tips helpful, we’d love to hear from you in the comments!