Credit is becoming more and more vital to people’s everyday lives. With everything from home buying to phone plans requiring a credit check, it’s more important than ever to have good credit. The better credit you have, the less interest you will have to pay on debts. You will also qualify to buy nicer homes and better cars when your credit score is higher. Luckily, there are many ways to fix a bad credit profile. They go from the extremely obvious ones, to more nuanced and lesser-known strategies.
1. Make Your Payments on Time
Hey, there’s one of those obvious ones! If you want good credit, you must make your payments on time, every time. Even a few missed or late payments will cause your credit to drop like mad, so the first step is to get all of your accounts in good standing.
2. Lower Your Usage
Another way to improve your credit score is to reduce your overall balance at the end of the month. This means paying off your cards all the way to zero, and only using them for small purchases each month. Then, you pay them off completely every month before the balances get too high. Reducing your total credit usage will improve your score quite a bit.
3. Increase Your Credit Limit
A lesser-known way to improve your credit is actually to apply for more. This doesn’t mean applying for 10 credit cards on a whim. This means maybe applying for one or two cards with good perks, only if you think you can get approved. Getting a bunch of hard inquiries on your file will not help your score, especially if they are declined. So, if you don’t think you can qualify for new credit cards yet, try requesting a credit limit increase on one of your existing cards once you pay it down. They are unlikely to say yes if you carry a massive balance, so only do this once you are in good standing with low balances.
4. Get Your Accounts Out of Collections
Having accounts go to collections is horrendous for your credit. Collections is when you have missed payments for so long that the creditor has given up on getting them from you, and sold the debt to a collections agency for pennies on the dollar. This is terrible news for your credit, but could be good news for your payoff. Since these companies often get your debt for less than it is worth, you may want to give them a call (or answer, because they will be hounding you). A lot of the time, you can offer as low as half of your original payoff to get things settled and done with, and make sure they get it off of your file. This doesn’t always work, but it is worth a try. Many will do it since they are just looking for a quick turnaround on the debts they buy.
5. Wait it Out
May of these issues, such as late payments, bankruptcies, and hard inquiries can take a while to disappear from your file. So, as long as you keep your accounts in good standing and pay them down, sometimes you just need to wait and allow your score to recover. It takes 7 years for bankruptcies to go away, 1 year for inquiries to stop affecting your score, etc. These being removed from the file will drastically improve your score. So, even if you don’t see results now, keeping your accounts in good standing will pay off eventually.
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Trey LaRocca is a freelance writer, financial sales worker, and tech guy. When he isn’t out and about or at work, he’s usually at home enjoying some video games and a beer. Currently residing in Newport Beach, this California Kid can be found at the beach on any given weekend. Trey has years of experience in day/swing trading, financial analytics, and sales.