Your credit score is what the lenders use to determine if you are qualified for a certain loan. When your credit rating is below average, getting a low-interest loan can be difficult if the application is approved by a prospective creditor.
Nevertheless, having a low credit score doesn't mean that your borrowing prospects are dimmed. With a few actions, you can ensure that you are utilizing credit once again.
Request a credit report
Checking your credit score is the first step towards its management. It gives you a clear picture of your situation and you’ll be able to make an informed decision. Most importantly, you’ll be able to know if there are any errors in the report that can be rectified.
Based on your history, you will determine areas that can be improved quickly to keep things in good shape. Besides, requesting a credit report won’t have any negative impacts on the profile.
You might be surprised to find out that you have more than one credit score. This is because there are different formulas to compute the scores and it is also influenced by the data used during the calculations.
However, most lenders rely on FICO score when making a lending decision. Nevertheless, some lenders will consider the scores obtained from the three credit reporting agencies.
Building your credit scores
If your credit scores are hurting, rebuilding them is not a one-day affair. If anyone approaches you with promises of instant credit repair, you should treat such people with caution since there are no overnight remedies when it comes to credit scores. The truth is that you have to go through the process by making timely payments and using all your credit cards diligently.
Basically, a negative item can hurt your credits for about seven years but as you continue to make positive progress, your situation improves with time. Every time you interact with creditors, your behavior is reported and it will directly influence your profile.
Sign up for an account that will help your credits recover
With the rise of the number of people who have low credit scores, service providers have developed credit cards that focus on repairing your credit scores. In most cases, these are secured cards where you have to make a deposit before being offered a line of credit.
The amount deposited in your account will serve as a security for the balance just in case you don’t pay the outstanding balance. Nevertheless, this doesn’t imply that repayments are optional. In fact, you should pay the balance on time since the creditor will report your transactions to the bureau.
As you continue working with these service providers, they will raise your allocated credit limit. And if you are diligent in your payments, they can refund the deposit you had made initially. At the same time, you can get a $5000 small loan from online service or credit union that is designed to build your credit scores.
Get blemishes cleared from the report
If you have a few blemishes on your credit report, you can reach out to the creditor and request them to delete the black mark. This works best if you are not a chronic offender. Most creditors will be willing to pardon you for late payments, but it also depends on your loyalty as a customer.
If the deal goes well and your lender agrees to remove the blemish, they will also send letters to the credit reporting bureaus.
After that, you have to get the documents that indicate the changes have been effected. In a nutshell, this is what is commonly known as a rapid rescore.
Consider approaching a credit counseling agency
If you have challenges handling your credit card balances, it’s possible to reach out to a credit counselor. Normally, they will help you come up with an appropriate repayment plan at a low cost.
However, this isn’t the same as working with a debt management company. These will hold negotiations with all your creditors in an attempt to reduce the total amount you owe. Nevertheless, you’ll be charged a fee for the service. If you are not in a serious financial crisis, you might want to stick to other means of handling debt.
Ride on someone else’s shoulders
When your credit scores are seriously suffering, it can be difficult to get a low-cost loan. However, if you have a spouse or someone who is really close to you they can help you end this nightmare. Of course, they need to have a good credit score.
To illustrate, if they have a great payment history and a credit card that's not utilized, you can benefit from their status. All you need to do is ask them to add you as an "authorized user" for the credit card. While this will allow you to use the available credit, any late payments on the account will be reflected in the profiles of both parties.
Always pay your bills on time
While this seems like a no-brainer, it's the fundamental step towards rebuilding your credit scores. You should realize that it only takes a few late payments to destroy your credit scores.
If you have some financial problems and you can’t pay all the bills on time, you should choose to pay the ones that are likely to be reported.
However, this shouldn’t be a recurrent strategy. Whenever you notice some difficulties in settling outstanding balances, you should look for ways to earn more money or adjust your budget accordingly.
While most people consider low credit scores as a stop sign, the truth is that you can regain your balance with time. Of course, this isn't something that will be achieved in a few months but if you are diligent, you can rebuild the scores.