Have you ever tried to take out a loan, only to be told that it won’t be possible due to your bad credit score? If you haven’t ever been in this situation, you may feel lucky. If it rings a bell, though, or you would rather keep it this way, this article will explain to you how to make sure your credit score is satisfactory.
What is it?
A bad credit score indicates that the borrower may have problems with repaying a loan. According to experts at nation21loans.com, there are several reasons that could have caused it:
- History of late credit payments
- Not paying your credit card bills
- Defaulting on a loan
- Declaring a bankruptcy
- A foreclosure
All of those things show that there is a considerable risk that you’ll have a hard time paying off a loan. Because of that, the creditors are more wary of risking their money, but the consequences are far more reaching. A bad credit score can lead to:
- High-interest rates
- Rejected loan and credit applications
- Issues with landlords
- Worse cell phone contract
- Issues with getting a job
- Higher insurance premiums
People with whom you’ll do business base their judgment on your credit score. If they have doubts about your ability to pay back, it doesn’t mean that they’ll walk away from the transaction, but the terms and conditions of the contract will be noticeably worse. They have to take into consideration that some of their customers with a bad credit score will fail to fulfill the contract. It means that on average, they have to have a bigger profit margin.
So what now?
Although this scenario is far from ideal, there are ways to improve your credit score. It will take some time and effort, but the benefits make it worth it. So, what you should do?
Pay your bills in time
It’s the most basic thing to do, but also the one that is the most crucial when calculating your credit score. If you have a history of on-time payments, the lenders will be less cautious. If the cause of your past problems was your faulty memory, you could set up automatic payments so that you’d be able to focus on more important things.
Get a secured credit card
Before you use this type of card, you’ll need to transfer some funds into an account. The information regarding your payments is then sent to credit reporting agencies, which means that if you have a healthy history of transactions, your credit score will improve.
Take care of your credit card balances
Try to stay reasonably within your credit limits. Staying under the limit is not enough. The percentage of the maximum credit limit that is used is taken into consideration when calculating your credit score.
Check your credit report
If there is any incorrect information on your credit card report, you can dispute it. Although this scenario isn’t very likely, it won’t cost you any money and almost no effort. To err is human, and people working in financial institutions are undoubtedly human.
Applying for new credit
If your goal is to improve your credit score, applying for new credit is something to be generally avoided. If you manage to stay out of trouble, it may pay off long-term, as you’ll have a history of on-time payments, but initially, your credit score will get worse.
But what if?
If due to some unforeseen event, you are in a sudden need of instant cash, and your credit score is too low to take out a loan, you can try your luck with private loan providers. This option should only be considered If you have no doubts about your ability to pay off the loan later on. This type of loan is characterized by high premium fees and steep interest rates. Unfortunately, sometimes, because of some medical emergency or a car accident, there is no time to wait for lengthy procedures, the only viable option being the same day loan.
It may be pretty disheartening to be treated with suspicion due to some past events, but it’s not the end of the world. Improving your credit score takes time, but if you remember to make payments on time and follow those basic instructions, you’ll see progress after a few months. Small steps, remember.