Everyone makes credit mistakes at some point with their finances. It could be a missed payment, an account going into collections or something big like a repossession or foreclosure. One thing is certain - no matter what it was that damaged your credit score, you can recover. Yes, it can be difficult. But it’s doable. The best way to rebuild and recover your credit score is to get informed and then get started.
By making smarter credit decisions, you can move past your mistakes and get your credit score back on track. The best thing is that you can start immediately. There are steps to take that can pay off in no time. Here are five ways you can improve your credit score.
#1 Pay on time
You’ve probably heard this before, but it’s no less true for the repetition. Nothing affects your credit score more than paying on time and paying in full. Payment history makes up 35% of your credit score calculation and should be a top focus of your improvement efforts.
If you make payments late, figure out why. Do you forget payments? If so, set up auto payments or get a big calendar and mark the dates prominently. Do you run out of money before bills are due? Pay them first or take an online class in budgeting and financial management.
#2 Get a co-signer
After suffering a big hit to your credit score, it may be difficult to find a lender that’ll give you credit. If you’re in this situation, you need the equivalent of a financial guarantor. You need a co-signer. Having a co-signer means you can benefit off their good credit.
This makes it easier for you to access credit. Once you get a new credit line with the help of your co-signer, your credit score should rapidly rebuild so long as you make your payments on time. With a co-signer, both your credit score and theirs is on the line.
#3 Try a credit-builder loan
This category of loans is created specifically to help you build credit when your credit score is less than optimal, or you’re just starting with credit. Starter loans can come from your bank, credit union, or independent lender.
These are unsecured loans – also called a “signature loan” and are usually small. The main thing is to ensure that the lender reports the debt and payments to the credit bureaus. If they do not, it’s not a loan you need. Also, watch for high-interest rates on these and be cautious.
#4 Get a secured credit card
For those with no credit cards in their wallet, you should know that they’re one of the tools to a fast credit score rebound. But if your score is too low to get one or you just completed a bankruptcy, you might need to begin with a secured card.
To get a secured credit card, you put down a deposit with the card issuer. This protects them against a potential loss and enables them to offer cards to those with lower credit scores. These are a stepping stone, and when your credit improves, you can move on to an unsecured credit card.
#5 Get added as an authorized user
Being added as an authorized user on an someone else’s credit card helps your credit so long as they keep up with their payments and don’t max out their credit lines. But, you must find someone willing to let you piggyback on their account and put themselves at risk.
Try these strategies to boost your credit score and improve your financial opportunities. For other help with your credit score, check out our Credit Score Keys DVD.