Everyone knows the problems that come with having a bad credit score. It can affect your ability to use the right credit cards with lower APRs, and it can even affect your residential and employment status if you’re applying for a mortgage, an apartment, or a job.
Even if you don’t have a low credit score, you can’t really predict the future. An unexpected job loss, a sudden dip in your home business, a divorce, or a medical emergency can all come up, and then you’ll have a credit fiasco on your hands. What’s also annoying is the fact that it probably took you a long time—years, actually—of maintaining a responsible credit system to jack up your credit score and it takes only a handful of missed credit card payments to thoroughly slash them down to size.
Fortunately, there are ways to raise them back up. Even though your low credit score prevents you from getting many types of credit cards, it’s still possible to have credit and to demonstrate responsible use of credit. Just remember that you really need to act responsibly from now on if you are determined to raise your credit score. Pay all your bills on time—that should be your Prime Directive from now on.
1. Use a secured credit cards. These cards require a deposit which determines your credit limit. It should, of course, report to the three major credit bureaus, and it can help increase your credit score if they report that you are indeed making your payments on time.
2. Don’t apply for credit too frequently. If you have a low credit score, you should already know that you won’t be approved for most of them anyway. Every time you apply for a credit card or a bank loan, your potential lender investigates your credit profile. The three major credit bureaus take note of each time an inquiry is made about your credit, and you can lower your credit score even further if you apply to too many credit card companies. Just apply for the credit you absolutely must have.
3. Is it time for you to buy a car? If you still don’t have a car yet, now may be the best time to get one if you can afford it and you have a steady source of income. Even with a low credit score, you can still obtain car loans at reasonable rates. This is another way to demonstrate that you can make payments on time, but you need to get a loan from a lender that reports your payments to the three major credit bureaus. Most lenders tend to do just that, but you need to check to be sure.
4. Don’t max out your credit cards. The ideal scenario is to pay your entire balance in full, which means you shouldn’t be making unnecessary purchases that you can’t afford in the first place. If you can’t pay in full, try to maintain a balance that’s less than 30% of your card limit. If you can contain yourself to just 10% or less of your limit, you can increase your credit score more quickly.
5. Again, pay all your bills on time! This includes your utility bills as well.
Do all these, and in about a year you should have made remarkable progress in increasing your credit score.