About 33 percent of consumers in the United States have bad or poor credit.
Bad credit doesn’t just make it difficult to access credit facilities at reasonable rates. It also makes it a lot harder to achieve your financial goals.
The good news? Bad credit isn’t a life sentence. Regardless of how ruined your credit score is, it’s possible to rebuild it.
Keep reading to learn some fast ways to increase credit score.
Know Your Score
Did you know more than 30 percent of Americans don’t know their credit score?
It’s one thing to know you’ve bad credit, and it’s quite another thing to know your exact score.
You’re probably wondering, “How is it possible to know the status of my credit without knowing my score?”
Well, if you apply for a personal loan and the bank rejects it saying your credit doesn’t meet their minimum requirements, you’ll automatically know you’ve bad credit, but you won’t know your score.
This is why you need to get a copy of your credit report and know where you stand. Only then will you know the amount of effort you need to put in to raise your score.
For instance, if your FICO credit score is 669 (bad), a single upward move to 670 will mean you now have good credit. However, if your score is 580, you have a long way to go and as such need to put in more effort.
Check Your Credit Report for Errors
It’s not uncommon for credit reports to contain errors. In fact, every year credit reporting agencies receive about 8 million credit report disputes.
After getting your credit report, comb through it and establish whether it’s accurate. Look out for the following common errors:
- Wrong identity information
- Incorrect accounts
- Closed accounts still marked as open
- Same debt listed twice
- Accounts with inaccurate current balances
- Accounts with an incorrect date of opening or date of last payment.
If you establish that your report has an error, file a dispute with the furnisher of the information (the credit reporting company).
Pay Up What You Owe
Letting loans go into default is one of the major reasons your credit score can nosedive from good to bad or poor. It’s for this reason paying up your debt is a quick way to improve your credit.
If you have the money to settle the debt in a one-off payment, do it and ask your lender to update your account. However, if you don’t have the money, approach your lender and agree on a repayment plan.
Although coming up with a repayment plan won’t help fix your credit immediately, it a big step in the right direction. At the end of the day, you need to honor your debt obligations in order to rebuild your credit. A repayment schedule is your blueprint to crawling out of debt and climbing into good credit.
Take Out Loans for Bad Credit
When you have bad credit, traditional banks will typically turn down your loan application (Read more to gain a deeper insight into the consequences of bad credit).
Fortunately, there are loans for bad credit you can take to help build your score. Here’s how this works:
Credit reporting agencies monitor your payment history. If you’re always paying up on time, that’s a sign you’re a financially responsible person. Credit reporting agencies will reward you with a better score.
So getting a loan for bad credit is an opportunity to build your payment history and let credit agencies see that you’re always paying on time.
Bear in mind, though, that bad loans for bad credit can be like a double-edged sword. While they’re ideal for building credit, they can also send you into financial ruin. If you take out the loan and are unable to service it, your credit score will tumble deeper into the red.
Don’t Apply for Multiple Credit Cards
The temptation to apply for several credit cards will always be there. But when you have bad credit, you shouldn’t play this game.
You see, when you apply for a credit card the issuer will check your credit score, which registers as a hit on your report. The more hits you have, the lower your score falls. This is because credit reporting companies consider too many hits a sign of financial pressure.
Ideally, you just need to get one credit card, especially one designed for people with bad credit. Use the card wisely and always settle the balance on time. Remember the key is to build a positive payment history.
Become an Authorized Credit Card User
If you’re unable to get approved for a credit card, you have the option of becoming an authorized user on someone’s credit card.
There’s a challenge, though.
Unless you have someone who understands your financial situation and has no qualms trusting you with their card (and money), it can be difficult to become an authorized user. But if you’re lucky to find this person, you’ll be well on your way to better credit.
As an authorized user, the credit card account will show up on your report. Credit reporting agencies will monitor the card’s repayment record and adjust your score accordingly.
Lastly, you can always buy a tradeline. A tradeline is basically the credit card industry’s term for an account in someone’s credit score. The idea here is that if your credit score is poor, you can find someone who has better credit and get added to their score. This is called “buying a tradeline” or “buying a credit tradeline“. Its a quick fix to improve your credit score, but you’ll need to supplement it with developing good habits – like paying your bills on time.
Implement These Fast Ways to Increase Credit Score
In this economy, nothing is more valuable than a good or excellent credit score. However, if yours is bad right now, there’s no reason to lose hope.
With these fast ways to increase credit score, you now know the steps you need to take to build your credit. Above all, practice financial responsibility.
Good luck and keep tabs on our blog for more personal finance tips.