If you have taken credit for any reason and you were unable to pay on time, then you’re probably one of the borrowers with less stellar credit rating. And so, you might be asking yourself, “How can I strategise debt management to give my credit rating a boost?”
Sometimes, we struggle with haunting questions at the backwash of our financial situation. When our debts are high and our income is low, we’re exposed to discouragement and disappointment.
Sadly, there are times that we may entertain feelings of raw dissatisfaction with ourselves for how we messed up financially. If you’re at this phase, it is important to encourage yourself that there are things you can do to make things better. You’re not the only one with a bad credit score, and you also need to realize that even those with very high income and plenty of assets can ruin their credit. It is because a credit rating is a result of many factors other than your outstanding debts.
Solve problems behind your poor credit performance
Every day is a test of our ability to make wise financial decisions. Generally speaking, a cup of coffee here and there may not hurt, but there are times that it would. What’s important is that we realize that some things are enjoyable to talk about, but big enough to make you struggle with your finances.
- Budget: When you feel pressured to repay a debt, you may feel that you are denying yourself of simple pleasures because you have to live on a tight budget. But, always look at the bright side—you’ll eventually pay off your existing loans on time and enjoy a better credit score in the future.
- Look forward to the benefits of having a good credit score: With a better rating, you can enjoy favorable mortgage rate and eventually get to spend less money on interest. You can also get a car loan at a lesser value, and probably save an average of $500 or more over the entire loan period. Some lenders also offer credit card rewards for as low as 13%, an interest that can help you clear your debt quickly. Others offer 0% interest on credit card for the first year to customers with remarkable credit rating, so you don’t have to worry about paying an interest rate in the first year of your credit. You can also enjoy other benefits such as cash back rewards and loyalty points for using the cards.
- Check your credit file to trace the causes of your poor score: Analyze your reports carefully to verify that the entries are indeed 100% accurate. Collect your bills and your credit statements to crosscheck with the entries in your accounts. A simple error can drop your credit score, especially if the account does not belong to you. The credit file is not easy to analyze—so, if you have access to a credit repair tool like DIY Clean Credit, use it to understand the codes and abbreviations to shorten entries.
The moment you found out the real culprit behind your low score—deal with it to fix bad credit. For example, if your utilization rate is higher than 30%, it’s time to limit spending using your credit cards. You can opt for debt consolidation loans instead to lower your debt. You may also opt for balance transfer cards to consolidate debts. If you don’t have multiple debts, but you keep on missing payments—perhaps it is time to sign up for automatic withdrawal to cover your minimum payment each month. Those with poor rating because of making frequent hard enquiries need to do some research first, before signing up for a loan. Look for lenders that will only make soft enquiries whenever you apply for a pre-approval of your loans.
Make reasonable lifestyle changes
Life is not a one sustained roar but an inch by inch development until we reach our goals. Once you decided to make wise money choices, you have to hang in there until you see the results. Perhaps, you need to cut out credit cards, pay off overdue debts or simply consolidate them.
Getting a higher credit rating is not the only thing that matters. But, making adjustments that would have a huge impact on how we carry debts and the way we manage our money is essential to realize what we have been planning all along. The most important question is-where are you heading?
Write down your goals, make a plan on how to achieve them and deal with problems one step at a time. Before you knew it, your credit report is higher, your finances are better and you are happier than ever—all because you decided to answer the question, “How can I improve my credit rating?”