If your credit is less than perfect, it doesn’t mean that you’re a lost cause. It’s important to remember that your credit score is not set in stone; in fact, there are a lot of different things you can do to improve it.
Your credit score is important because it directly influences your ability to borrow money. So, if you’re looking to take out a new credit card or apply for a mortgage or car loan, typically the better your score, the better your chances of being approved. A favorable credit score can also allow you access to better financial opportunities, such as a lower interest rate on a loan.
Generally speaking, scores fall into these credit score ranges:
Excellent Credit: 750+
Good Credit: 700-749
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 600
If your credit score is currently in one of the bottom three tiers, you should focus on raising it to the “good” or “excellent” range. Here are some recommendations to help you achieve just that:
Ensure Your Credit Reports are Accurate.
Reviewing your credit reports is a good first step in improving your credit score. You can access your reports from the three major credit bureaus – Experian, Equifax, and TransUnion. The good news is that under federal law, you’re entitled to a free copy of your report from each of the three credit reporting agencies each year. Just go to www.annualcreditreport.com and follow the instructions to obtain your free credit reports.
Once you have your reports, review each one carefully to ensure that all of the information is accurate. It’s possible for there to be errors in one report while the others are clean, so be sure to review them all. So, what should you look out for? For starters, if you know you’ve never missed a payment, but your report indicates you have, you’ll want to get that resolved. Inconsistencies on your credit report could negatively impact your credit score. You’ll also want to look out for any accounts or credit inquiries that you didn’t make – as those could be a sign of your identity being compromised. Other potential indicators of ID theft or mix-ups could include addresses, names, birthdates, or social security numbers that you don’t recognize. Any incorrect information found in your credit reports should be reported immediately. The Federal Trade Commission provides sample letters you can use for disputing information with the credit reporting agencies, as well as the organizations or financial institutions that provided the erroneous information to the credit bureau.
Consider a Collateral Loan.
Commonly referred to as Passbook loans, or Secured Personal loans, Collateral loans can be a great way to improve your credit score. Collateral Loans are a type of loan where you borrow money using funds you already have in the bank as collateral. So, if you have a savings account you don’t want to wipe out, or a certificate of deposit that hasn’t matured yet, you can get access to those funds through a loan, without having to withdraw from the account. Usually, having poor credit is kind of a “catch 22”. You want to take out a loan or open a credit card so you can help raise your score through on-time payments, but it’s hard (if not impossible) for you to get approved for an Unsecured Personal loan. However, with a Collateral loan, because the money you’re borrowing is secured by the funds you already have in your savings account or CD, you have a higher likelihood of being approved with poor credit.
And once you have a Collateral loan in your name, you can work to incrementally raise your credit score with every on-time payment you make – helping you to establish credit history and creditworthiness.
For more information on Collateral loans, visit https://www.bankfive.com/Personal/Borrow/Personal-Loans/Collateral-Loans.
Reduce Your Credit Card Balances.
One factor that plays a large role in determining your credit score, is how much revolving credit you have available, compared to how much of it you’re currently using. For example, if you have two credit cards, each with a credit limit of $5,000, your total available credit is $10,000. If you have a $1,000 balance on one card, and a $500 balance on the other, you’re using 15% of your available credit - $1,500 of your available $10,000. Generally, the lower your percentage of utilized credit, the better your credit score. Experts advise using no more than 30% of your available credit. If you’re currently utilizing more than 30% of your available credit, you can improve your credit score by paying down your balances and keeping them low.
Ensure Timely Bill Payments.
Paying your bills on time is crucial if you’re serious about raising your credit score. Late payments and missed payments can have a huge negative impact on your score. And, if you decide to take your time paying a bill, it could prompt a creditor to turn to a collections agency to recover the money you owe. That’s something you definitely want to avoid, as having collections accounts on your credit report can cause your score to take a serious nosedive.
Limit Your Credit Inquiries.
If you’re working to improve your credit score, you should also be aware of the impact that credit inquiries have on your report. When you apply for credit, the financial institution requests a copy of your credit report. This is referred to as a “credit inquiry”. Applying for a large number of credit accounts can result in multiple credit inquiries on your report, which could have a detrimental impact on your credit score. A good rule of thumb to improve your credit score is to only apply for new credit accounts when you need them.
By getting a good handle on your credit score, and pinpointing what is currently hurting it, you can take the necessary steps to improve your credit. After all, banks and credit card companies aren’t the only ones interested in your credit score. In this day and age, an improved credit score can assist you with so many other things, such as your ability to rent an apartment, or even get a job!
Your credit score is important because it directly influences your ability to borrow money. So, if you’re looking to take out a new credit card or apply for a mortgage or car loan, typically the better your score, the better your chances of being approved. A favorable credit score can also allow you access to better financial opportunities, such as a lower interest rate on a loan.
Generally speaking, scores fall into these credit score ranges:
Excellent Credit: 750+
Good Credit: 700-749
Fair Credit: 650-699
Poor Credit: 600-649
Bad Credit: below 600
If your credit score is currently in one of the bottom three tiers, you should focus on raising it to the “good” or “excellent” range. Here are some recommendations to help you achieve just that:
Ensure Your Credit Reports are Accurate.
Reviewing your credit reports is a good first step in improving your credit score. You can access your reports from the three major credit bureaus – Experian, Equifax, and TransUnion. The good news is that under federal law, you’re entitled to a free copy of your report from each of the three credit reporting agencies each year. Just go to www.annualcreditreport.com and follow the instructions to obtain your free credit reports.
Once you have your reports, review each one carefully to ensure that all of the information is accurate. It’s possible for there to be errors in one report while the others are clean, so be sure to review them all. So, what should you look out for? For starters, if you know you’ve never missed a payment, but your report indicates you have, you’ll want to get that resolved. Inconsistencies on your credit report could negatively impact your credit score. You’ll also want to look out for any accounts or credit inquiries that you didn’t make – as those could be a sign of your identity being compromised. Other potential indicators of ID theft or mix-ups could include addresses, names, birthdates, or social security numbers that you don’t recognize. Any incorrect information found in your credit reports should be reported immediately. The Federal Trade Commission provides sample letters you can use for disputing information with the credit reporting agencies, as well as the organizations or financial institutions that provided the erroneous information to the credit bureau.
Consider a Collateral Loan.
Commonly referred to as Passbook loans, or Secured Personal loans, Collateral loans can be a great way to improve your credit score. Collateral Loans are a type of loan where you borrow money using funds you already have in the bank as collateral. So, if you have a savings account you don’t want to wipe out, or a certificate of deposit that hasn’t matured yet, you can get access to those funds through a loan, without having to withdraw from the account. Usually, having poor credit is kind of a “catch 22”. You want to take out a loan or open a credit card so you can help raise your score through on-time payments, but it’s hard (if not impossible) for you to get approved for an Unsecured Personal loan. However, with a Collateral loan, because the money you’re borrowing is secured by the funds you already have in your savings account or CD, you have a higher likelihood of being approved with poor credit.
And once you have a Collateral loan in your name, you can work to incrementally raise your credit score with every on-time payment you make – helping you to establish credit history and creditworthiness.
For more information on Collateral loans, visit https://www.bankfive.com/Personal/Borrow/Personal-Loans/Collateral-Loans.
Reduce Your Credit Card Balances.
One factor that plays a large role in determining your credit score, is how much revolving credit you have available, compared to how much of it you’re currently using. For example, if you have two credit cards, each with a credit limit of $5,000, your total available credit is $10,000. If you have a $1,000 balance on one card, and a $500 balance on the other, you’re using 15% of your available credit - $1,500 of your available $10,000. Generally, the lower your percentage of utilized credit, the better your credit score. Experts advise using no more than 30% of your available credit. If you’re currently utilizing more than 30% of your available credit, you can improve your credit score by paying down your balances and keeping them low.
Ensure Timely Bill Payments.
Paying your bills on time is crucial if you’re serious about raising your credit score. Late payments and missed payments can have a huge negative impact on your score. And, if you decide to take your time paying a bill, it could prompt a creditor to turn to a collections agency to recover the money you owe. That’s something you definitely want to avoid, as having collections accounts on your credit report can cause your score to take a serious nosedive.
Limit Your Credit Inquiries.
If you’re working to improve your credit score, you should also be aware of the impact that credit inquiries have on your report. When you apply for credit, the financial institution requests a copy of your credit report. This is referred to as a “credit inquiry”. Applying for a large number of credit accounts can result in multiple credit inquiries on your report, which could have a detrimental impact on your credit score. A good rule of thumb to improve your credit score is to only apply for new credit accounts when you need them.
By getting a good handle on your credit score, and pinpointing what is currently hurting it, you can take the necessary steps to improve your credit. After all, banks and credit card companies aren’t the only ones interested in your credit score. In this day and age, an improved credit score can assist you with so many other things, such as your ability to rent an apartment, or even get a job!