Do you plan to take financing for a major purchase (house or car) in the coming months? If you haven’t been conscious about your debt financing obligations and payments recently (or in the not-so-distant past), you may already have a bad credit history and you must improve it to bolster your chances of getting future loans instantly approved and enjoy the best offers (with ideal interest rates, tenors, and other conditions).
While bad credit loans can be of big help when you need financing urgently, achieving and maintaining good credit scores is still recommended—and it is actually a necessity. In the modern world, having a credit history (whether good or bad) is still better than not having one at all, but it pays to keep an improved and strong credit score at all times.
Improving credit history may take some time to do, but there are always effective strategies to do so more quickly and surely. Here are some practical ways to manage your personal finances and gain some positive credit scores in the process:
Pay your monthly bills on time.
Most credit rating agencies initially look at an individual’s payment history when monitoring or updating credit scores. How you handle and pay your monthly dues logically indicates how responsible and diligent you are when paying obligations, be it great or small.
Thus, you can generate some positive scores to improve your credit ratings when you religiously avoid making late payments. Be more conscious about all your monthly bills and their due dates. It will be best to settle due amounts before or during the dates due.
Having problems monitoring all your monthly dues and keeping track of due dates? You may consider automating monthly bill payments to your bank account or a credit card. However, when deciding to make automatic payments through credit cards, be sure to pay the amounts in full every month so you can avoid incurring interest charges and negative points to your credit scores.
Have the discipline to limit credit use to 30% or less.
Do you usually maximize the use of your credit card or credit line limit? The way you regularly use credit impacts the credit utilization factor of your credit score. From now, moving forward, you may consider setting a personal discipline to use only up to 30% of your credit limit each month. Ideally, lowering that further to just 10% or less can drastically do wonders for your credit score.
If it seems like a difficult monthly goal especially when you have enrolled automatic payments on your monthly bills, you may consider asking your issuing bank for an increase in credit limit. This way, you can also raise your 10% or 30% spending limit each month.
Want to further speed up generating positive credit scores? Paying credit card balances in full every month will bring about surely ideal results. Doing so could be easier if you could limit your credit limit utilization to just 30%, 10%, or less!
Consider debt consolidation.
Do you have outstanding debts from various creditors? You should be able to make payments regularly and on time on due dates. If you have a hard time keeping track of due dates and minimum payment amounts (it could be quite confusing especially if you are busy with lots of other things), it would be best to consider debt consolidation.
In general, this strategy involves getting a new loan to repay all other existing loans—so you could get rid of various loans and focus on repaying just one. A consolidated debt can be easier to manage and monitor. Repaying numerous other loans also generates positive scores (still much higher than the negative points you incur applying for and receiving that new loan).
If your credit history has gone bad and most banks don’t easily approve you for a debt consolidation loan, you may consider bad credit loans available. There are options being offered, still, with interests and terms you can manage while aiming to improve your personal finances. Bad credit loans can bring you to good credit standing if you keep your personal finance discipline and determination.
Keep old credit accounts active and avoid requests for new credit.
Credit score agencies usually see it as a positive sign when old credit accounts are maintained. Thus, it is more advisable to maintain old credit card or credit line accounts instead of closing those down and applying for new ones. It is a rule of thumb—older credit accounts are more favorable to gain positive credit scores (but still of course, as long as those accounts are properly maintained and credit utilizations are in check).
If you have been delinquent in payments in the past (whether intentional or unintentional), it is still not too late to make it up. Set a workable or feasible plan to make sure all your future payments are made on time. Doing so may not clear you of past late payment delinquent scores but at best, you can increase your positive scores moving forward.
Also, be aware of soft and hard inquiries. When you check your credit score, when you undergo financial checks by a potential employer, or when credit card issuers check your files for approvals, you are subjected to soft inquiries, which do not impact your credit scores.
On the other hand, avoid hard inquiries as much as possible. Those include applications for a home loan, car loan, or other big loans. Applying for a new credit card also incurs hard-inquiry negative scores. It is not bad to take any of such loans one at a time, but it will really hurt your history when many of those loans are applied for at the same time, or within a short period.
Conclusion
It takes a lot of patience, determination, and discipline to improve one’s credit history. It is important to have sufficient credit activities so monitoring agencies can have factors to monitor your credit scores. If incurring negative credit scores becomes inevitable at some point, have the resolve to make it up and generate positive scores through the strategies above. Keep a good credit history no matter what. You may need it one way or another in the future.
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