Your credit history is a financial measure that banks and other institutions look at before they decide to lend you any money. If you have a good credit score and history, you’re more likely to obtain more favorable loan terms, which can include lower interest rates.
However, if you have a lower score, you’ll likely need to pay a higher interest rate for whatever amount you borrow. Depending on the amount you borrow, this can cost you hundreds of thousands of extra dollars over time.
If you have a credit score that you’d like to improve, don’t worry. There are many different ways you can improve your credit score and repair your credit over time.
The higher your credit score, the more likely you are to be in good financial health. The following sections explain five simple steps you can take today to start repairing your credit now.
If you have a low credit score, it’s probably because you’ve got some unpaid debt. If you borrow a lot of money and don’t pay it off, this will have a negative effect on your credit score.
Likewise, if you have any unpaid medical bills or utility bills that have gone to collections, this will also impact your credit in a negative way. In order to effectively repair your credit, you’ll need to pay off any debt you have.
If you want to improve your credit, you’ll first need to come up with a plan. This means you must consider the following points:
If you’ve maxed out several credit cards and can’t remember when to pay them, you might benefit from consolidating your debt onto one card.
Debt consolidation can also be a good solution for you if the credit cards you currently have carry high interest rates. A high interest rate affects how much money you need to pay your lender over time, which is added in addition to the principal amount you borrowed.
If you’re interested in consolidating your debt, you can transfer the outstanding credit card balances you have onto a new card.
There are many different credit cards that are made specifically for people who want to transfer their debt onto a new card. Usually, these cards come with zero annual percentage rate (APR) during the first year you have the card. This means you won’t need to pay any interest on your balance during that time.
If your credit score is less than what you’d like for it to be, getting a secured credit card might help you to start rebuilding your credit. This is an especially good option if your credit score prohibits you from being approved for an unsecured card.
Unlike typical credit cards, you can’t start using your secured credit card until you put a security deposit down on that card. Then, this security deposit becomes your credit limit. This means you’ll never be able to spend more on your secured credit card than what you put down as your deposit.
Secured credit cards don’t pose much risk to the lender, so you shouldn’t have any trouble getting approved for one of these cards.
If you’re in debt because you have trouble remembering to pay your bills on time each month, setting up automated payments can be a helpful option for you. This option is usually available in online portals.
Whether you need to pay your credit card or utility bills, there should be an option for you to arrange for your payment to be automatically taken out of your bank account each due date. This way, you’ll never miss another payment.
However, make sure you only utilize this option if you’re sure you’ll always have enough funds to cover your payment. Otherwise, you’ll overdraw your bank account, which can make you subject to even more fees.
Furthermore, make sure your money is set to be withdrawn after your payday. If not, the funds won’t be in your account, and you’ll run into issues with your bank and the company you were trying to pay.
Another critical component that can make or break your credit is whether you pay your bills on time.
When most people think of credit, they only think of money you borrow and need to pay back, like with credit cards or loans. However, failing to pay your utility bills on time each month can also have a negative affect on your credit score.
Therefore, it’s important that you make sure to pay these bills before they’re due. By catching up on overdue payments and staying on top of new utility bills, you can improve your credit over time.