I recently was rejected when I applied for a credit card with benefits that I really wanted to have. I applied every few months as was recommended and each time was turned down. Finally, I found out that my country recently implemented a credit score, and mine was bad because of things that happened over the course of my divorce a few years ago. This really is frustrating and I'm looking at ways to improve my credit score. Those aren't going to be the same things as for people in the US, but if you have a problem with a bad credit score, read on for tips on how to improve yours.
It’s important to maintain a decent credit score for several reasons. A good credit score offers a lowered interest rate, premium credit cards, and great loan products. But with a below-average credit score, you might not qualify for such benefits.
Though there are finance companies that issue loans to such credit holders, you’re still a flight risk to any mainstream lender. For instance, when you’re seeking a car loan. Though there are many car finance companies for bad credit cardholders, it’s always better to aim toward a good credit score.
If you’re looking to boost your score, there are a few solutions—even when you’re knee-deep in debt. But you can’t rebuild your credit profile overnight. Follow these simple steps to improve your credit score in the safest way possible.
Pay Off All Your Debts
One of the best ways to work on your already damaged credit score is by paying off your debts. Start by assessing your current financial situation. Doing so will help you put together a list of all your current debts, including loan premiums, mortgages, and more.
Once you’ve calculated how much you need to pay every month, your next step is to control your spending. Budget your monthly finances according to your earnings. Do so by cutting down on unnecessary expenses.
While this process does take time, this is the only way you can prevent your credit score from going bad to worse. The goal is to realize your financial priorities and track spending.
Become an Authorized Card User
To do this, you’ll need help from someone who already has a good credit score—it could be family, a friend, or even a colleague.
If any of your contacts have a good credit record and a high credit limit, you can always ask to become an authorized user. Known as credit piggybacking, it adds your profile under the same credit account.
This way, you can gain some credit points on behalf of the primary user’s payment history. You don’t need to use the account holder’s card. You just have to add their account to your credit reports.
Resolve Any Credit Report Errors
Mistakes on your credit report can impact your score. For this reason, it’s important to dispute any errors by getting a free credit report from the credit bureau.
From payments issued on the wrong date to fraudulent transactions, it’s important to spot these red flags. Whether it’s a mismatch in the balance amount or identity theft, you should notify the credit bureau immediately.
Explain in writing what the problem is and include all supporting documents. Providing evidence of any kind will strengthen your case. The process is worth the wait, especially if you’re trying to build your credit score beforehand.
Focus on Utility Payments More
When you’re using your credit card, you need to be strategic in your decision-making. A good step is to use only 30% of your credit limit. You should track your credit utilization and maintain consistent usage. Set calendar reminders or alerts to your phone to issue your card payments on time.
Another way to cut late payment fees is by using your credit card only for regular payments. Include expenses such as weekly groceries, electricity bills, gas, rent, insurance premiums, mortgage bills, and more.
Every month, before the billing cycle is due, you can pay the credit card balance out of your monthly earnings.
Deal With Your Collections Accounts
Having an account in the collections department can negate your credit points. If you’ve already received notice from the collections office, it’s time to get serious.
The only way you can stop derogatory claims from popping up in the credit report is by paying off your dues. This way, you can have your account status updated to paid off. If you’re still receiving calls from the collection agency, it means your account is under active debt.
The FICO 8 model still takes paid collection into account. But VantageScores and the more recent FICO models ignore this data while reviewing your credit score. If you don’t want your credit score to decline over time, ask the collection agency for a goodwill deletion.
Stimulus Check for Your Credit Debt
While this option may not be eligible for everyone, it’s still a better choice compared to issuing a new credit card. As a response to the pandemic, the U.S. government did provide monetary relief to those affected by the global disaster. If you’re one of them, a stimulus check could be your way out of debt.
It makes sense to use a stimulus check to pay off your pending debts. Whether you have an emergency savings fund, this money is a great way to rebuild your credit score from scratch. In fact, many working professionals have begun to cash in according to a recent CNBC report. But you should only consider this option once the economy has stabilized.
Bottom Line
Depending on your unique credit situation, you should lay down a good track record first. Even if you’re struggling with a bad credit score, you still have a chance to get a 100-point increase by making small changes. For instance, you could issue a credit-building loan or a secure card. Additionally, when you’re building your credit profile, ensure that your credit accounts report back to the credit bureau.