Trying to improve your credit score can be a burden, especially if you know that in the immediate future it will be difficult to eliminate your debt due to financial constraints.
Your credit report and credit score are used to assess financial risk. It offers lenders a method to predict your reliability when it comes to paying bills and any other loans or debts that you may have. If you are seeking more credit, then these two indicators will be used to determine the result of your application. The higher your credit score the less you are of a risk and this will help you get better loan terms as a reward.
A credit score is not just based on how much credit you have, but more than 33% of it relates to your payment history. In simple terms this means that you will lose points if you make your payments late.
Your credit record does not only affect your chance to gain further credit but it may also affect your ability to secure a job or even obtain reasonably priced insurance. These factors make it important to maintain a good credit score and seek ways to improve it.
Here are Some Tips on How to Improve Credit Score
- Keep your credit card balances low.
- Ensure your purchases are less than 25% of your credit limit at any time.
- Pay on time. If possible, set up an automatic electronic payment timetable with your bank. This ensures your payments are made on time.
- Pay more than the minimum payment. This means less interest and faster repayments. Remember that making minimum payments will take points from your score.
- Keep old credit card accounts open. It is normally a good thing to maintain old cards, which have a longer credit history.
- Avoid applying for credit unless it is absolutely necessary. Applying for retail stores credit cards might not be the best idea when trying to improve your credit.
- Pay Fines on Time. Promptly pay any parking and traffic tickets. If the bill is forwarded to a collection agency, your credit score could drop significantly.
- Dispute inaccuracies on your credit report. You can do this on your own or hire a consumer law lawyer that can help you resolve any credit disputes in a short period of time and without any stress.
If you find an inaccuracy in your annual credit report you must report it to the credit bureaus, with exact details of the error. You should send it by certified mail with copies of any supporting paperwork. You must ask for the mistake to be removed from your credit report. The credit reporting company will ask the information provider to justify the inaccuracy. All credit disputes should be resolved within 30 – 45 days. If this is not the case you should contact a consumer law lawyer to help you get it resolved right away.
The reporting company must inform all parties, including potential employers who have received your credit report in the last six months, of the changes. If the dispute is irreconcilable, a report of the incident should be noted on the credit report.
How to Recover from Bankruptcy, Debt Settlement or Loan Modification
Many Americans have had the necessity to turn to some form of debt relief option. The most popular debt relief options are bankruptcy, debt settlement and loan modification. These options will damage your credit to different levels but with our current bad economy many consumers have not had other choice but to turn to one or more of these options. This does not mean they are not responsible; it just means they had or have a financial hardship.
If your debts have been impossible to pay off and you have partially resolved your situation by reducing the burden through debt settlement options or through a Chapter 7 or 13 bankruptcy or even through a loan modification, you have to ensure that this situation does not occur again.
You may want or need to borrow money again, but be careful particularly if you are recovering from bankruptcy. There are a few predatory lenders who deliberately target people like you who are just out of bankruptcy, knowing that you are keen to get credit.
Work out a clear step-by-step plan for your future spending. For example, you might be considering purchasing a home. This is a large investment, so you should ensure you minimize your debt. You can, of course, obtain credit but make sure you can reestablish a reputation for handling it. This will mean that an application for a home loan will be easier to get approved later on.
In many cases you are able to start improving your credit score within a couple of years after bankruptcy, debt settlement or loan modification. A consumer law lawyer can help you assess the damage and develop the best plan to do so.