In this article, we want to make something very clear and that is, if you have a bad credit score and you don’t have a way to improve that for some time, don’t worry, just go after the best loans for poor credit ranking and if you are proactive, you’ll most likely get the loan you really need, even on your actual situation.
As the saying goes, “nothing is certain except death and taxes,” but the same can apply to your credit score.
Whether you need a car loan, a home loan, or just more spending power, you need to have a decent credit rating to get approved for these loans and get lower interest rates.
See below 5 ways to get you on the path to a better credit score:
You’re entitled to one free annual credit report. Be sure to ask for your report and check the data. There can often be errors on your report that cause your credit score to drop. Verify that there are no late payments, debts or erroneously reported credit limits. Your credit score is determined based on this report, and it plays an important role in the loans you qualify for and the interest rate you will pay.
If you’re considering a major purchase, like a car or home, request a copy of your credit report a few months in advance. Also, if you have small bills, like co-pays for medical bills that often show up on your credit reports, call your health care provider or collection agency first to pay them, and then ask them to remove them from your credit report. You’d be surprised how much a few $10 copays can lower your credit score.
Credit card debt and making the most of it are one of the main factors that can lower your credit score. The higher the percentage of revolving credit you are using, the worse it is for your credit rating. Try to keep your outstanding balances below 30% of your credit limit, below 10% is even better.
If you have a lot of credit card debt, make a list of all your outstanding balances, pay off your lowest balance and work your way up to the highest. As you pay down your smallest credit card debt, you can put the money you would have paid for those low balances you just paid off toward the next higher balance. This trick, known as the debt snowball method, really works to help you pay off your debts and increase your credit score. Once you’ve paid off your credit card debt, make sure you don’t cancel it, as canceling these lines of credit can also lower your credit score.
If you have an outstanding debt that was reported in error or you actually forgot to pay a bill on time, call the company that reported the late payment and request the removal of this derogatory information. The creditor will ask you for a letter explaining the reason for the delay or the error. They will let you know whether or not they will remove this derogatory information.
If your application is approved, always ask for this approval in writing and keep it for your records. You can’t imagine how many people we’ve helped with their credit score, who went to buy a home and discovered that a past derogation, which at some point was removed, had reappeared.
Make sure you don’t spend all that time cleaning up and raising your credit score just to get that long-awaited home loan approval and then make a big purchase on credit.
It is true that lenders make decisions based on your score and credit report at the time of application, but they will re-analyze this data not only after loan approval, but also just before closing. If a new purchase appears on your credit report, your loan may be affected. One of our past clients went out and bought a new Corvette after I helped him stabilize his credit score for a home loan. The lender made a review just before closing, which changed the debt-to-equity ratio and affected his loan.
With the challenge in the world’s economy these times, you may have difficulties paying your bills at some time. Don’t hesitate to call your lender or credit card company and let them know of any problems you’re having. Many lenders and credit card companies are working with people who have been affected by COVID or other unexpected events. If you have experienced any difficulty and have stopped paying or have a late payment, once you recover, the best thing you can do is start paying your bills on time. The more you pay your bills on time after being late, the more your credit score will increase. Recent good payment patterns will eventually hide bad ones.
Improving your credit score doesn’t happen overnight, but by following these tips you’ll be on your way to a high credit score that will get you lower interest rates and more money in your pocket.
