Steps To Improve Your Credit Score
Financial struggles are a part of life. You may have dealt or are still dealing with money issues that prevent you from fulfilling your financial obligations, such as regularly paying your dues on loans and credit cards. Whilst financial challenges are beyond your control, you know you have to be on top of these concerns in order to avoid being haunted by them in the future.
This is why it is very important to settle financial obligations in a timely manner, so they will not result in a bad credit history. An unimpressive financial record affects many aspects of your life, and this is the last thing you want when you intend to get your life back on track.
You may think that repairing your credit history is easier said than done, but all it takes is empowering yourself with the right information that will allow you to take the necessary steps towards fixing your credit history and hopefully, maintaining its good standing.
Here, we’ve outlined the important steps you must keep in mind to improve your credit history in order to qualify for a cash advance loan.
1. Know your credit score
The initial step to fixing your credit history is knowing where your credit stands – that is, having your credit score checked, which sets the tone for any other step you will take next. A credit score is a three-digit number that gauges a borrower’s qualification for a loan or a credit card. This is used by all lenders when assessing if a borrower is eligible for a loan or credit card approval.
A low credit score may not get you approved when you are applying for a loan or a credit card. Lenders will attribute this to your incapability to pay regularly, hence will lead them to conclude that you are too much of a risk to gamble on.
A high credit score, on the other hand, is what a borrower should aim for in order to get approved for a loan or credit card application. A good credit score simply indicates that you have been a responsible payer in the past, thus will give lenders the impression that you can be trusted to take on a new loan or credit card.
How to find your credit score
To know if your credit score is below or above average, you must secure a copy of your credit report from a reputable credit reporting agency. When requesting for your report, you will need to provide:
Your full name and date of birth
A valid phone number
Your address, both current and previous
Proof of identification, such as your birth certificate, passport, or driver’s license
Proof of address that also indicates your full name, such as a bank statement or utility bill
Names of your current and previous employer
The good news is that you can file for this information and get your credit report in an instant. Agencies like Equifax and Experian provide credit scores and credit reports for free when you access their websites. It is recommended, though, that you get in touch with multiple credit reporting agencies to get your credit report. Having a good credit score will prevent you from needing a no credit check loan.
Upon receiving your request, your credit score will be assessed according to a number of different factors. Some agencies may provide different information about your credit history, which may affect your score. Most of these agencies also offer credit reports for free but only once per year. You can get yours within 10 business days or if you want to get one immediately, a small fee is required to expedite its release.
What to do when you receive your report
Once you receive your credit report, make sure that it indicates the following:
Your credit account information
Your monthly payment history
Your credit inquiries
It is important that you review your credit report carefully to check for any errors or omissions. Not only should you check for the right debt amounts but also your personal details. When checking the debt amounts, make sure that they are not listed twice.
Should you have any other negative issues like bankruptcy or liens, keep in mind that these financial legal issues may eventually age off your credit reports.
2. Find out if there are errors in your credit report
Should you find any errors in your credit report, it is a must that you report this to the credit reporting agency where you filed the request. Small errors may be amended right away, but if the mistake comes from the creditor, it could be much more complicated to fix.
If the information in your report is inaccurate, you can go to the Australian Financial Complaints Authority to report the mistake. You can also get in touch with the Ombudsman to ask for help should your concern takes longer to be addressed.
You can also hire the services of a credit repair agency to amend the defaults or negative listings on your credit record. Such agencies get the job done for a one-time fee.
So as you review your report, take note of the following to ensure they aren’t inaccurate:
Your outstanding debt isn’t reflected on the report as the creditor failed to notify you
Your report doesn’t reflect the renegotiated terms or payment arrangement you and the creditor agreed upon
Your report indicates an account that was erroneously created
Your report shows a new account that was created as a result of identity fraud
Your report indicates that you have a default account, or that your account is overdue for more than two months
3. Repair your credit score
Once you know your credit report isn’t inaccurate, the next question would be: Do you need to repair it? To know if your credit score needs any repair, you have to know if yours is on the negative or positive side of the credit score spectrum. You may need to repair your credit score if you expect to get anything other than no credit check payday loans.
A low credit score is one that falls between 0 and 620. If yours is anywhere between these numbers, it simply means your credit history is below the accepted average credit score, which may result in disapproval of that loan or credit card you are applying for or much higher interest rates will be given unto you should your application get approved.
So, the last thing you need is to have a poor credit score when applying for a loan or credit card. It is thus important that you know the factors that may lead you to get a low credit score, which includes not only late payments on your dues but also bankruptcy, defaults, overdue accounts, and one too many credit inquiries in such a short period.
If any of these reasons led to your poor credit score, know that there is hope. The next step to take is moving your credit score from the negative by adopting good paying habits.
How to build a positive credit history through good financial habits
You can start building a good enough credit score to get a loan to payday with paying your bills on time, which will set in motion a lifestyle of being financially responsible. Timely pay your rental dues, credit card bills, and other utilities to avoid not only late-payment charges but also a bad record on your credit history. Overdue payments typically remain in credit reports for a minimum of five years, and when lenders see that you have a history of late payments, they will take this into consideration when assessing your eligibility for a loan or credit card.
When paying your bills, make sure to pay meet the minimum payment required. If you can afford it, pay the amount due in full to avoid paying for accumulated interests. If you have bills that you share with a family member, it is wise to put these accounts under your name to help improve your credit history.
If you can, make a habit of staying ahead of your payments. If you find yourself slightly behind, make sure to pay your dues immediately once you get the chance. Know that older late payments that are reflected in your report have more impact than recent payment records, thus may still affect your credit assessment.
You must also work with your lender should you find yourself hard-up on cash and won’t be able to make a repayment. It is better to notify your lender immediately, so you may ask for an extension or negotiate for another payment arrangement that will allow you to meet your future dues in a timely manner.
In times when you can’t keep up with all your payment dues, it is a smart move to opt for direct debits or automatic payments. You may use bill-tracking apps like Prism or Mint which sends an automatic reminder when your payments are due. Or, you can simply keep a calendar of all your payment dues if you are not too keen on using high-tech apps.
4. Consider a low credit limit
The final step to improving your credit history is to keep your credit balance low. This means switching to a credit card that offers a low credit limit. With credit card that has a larger credit limit, you won’t be able to control your spending.
With a credit card that has a lower credit limit, you may set your credit limit in the amount that you can afford to pay. To know the credit limit you can afford, you can check your debt-to-credit ratio. Keep in mind that a low credit balance is much better than a high balance that you cannot pay off consistently.
You can lower your credit limit by choosing a credit card that offers lower interest rates. Or, opt for a new credit card that will allow you to transfer your credit balance at a much lower rate.
Remember to apply for a credit card when it is only necessary. Avoid applying for multiple credit cards, especially when you do so in a short period of time. Note that multiple credit card applications also negatively affect your credit score.
You may, however, consider diversifying your credit, which allows you to pay for multiple credit accounts at a later date. For lenders, this indicates sound payment practices, as they can see that whilst you have a number of credit accounts (e.g., multiple credit cards, short- and long-term loans, mortgage, or car loan), you responsibly pay for your dues. Make sure, though, that credit diversification suits your needs and indeed something that your resources can afford to meet.
Applying for a loan with a bad credit history
A bad credit score doesn’t have to dishearten anyone who wishes to apply for a loan or credit card. Some lending companies are lenient enough with their assessments, as they believe assessing one’s credit history is just a small part of the evaluation process when assessing an individual’s ability to pay. They may even accept Centrelink as a form of payment to receive a Centrelink loan.
Some lenders would rather assess your current financial status than your past financial-related blunders. More often than not, they believe a bad credit history doesn’t completely say everything about an individual’s financial responsibility.
Nevertheless, you’d be better off on the safe side when credit history is concerned. Whilst you cannot do anything anymore about the past mistakes that led you to get that bad credit score, you can do something about it now by making an effort to repair it and further improve it, so it will no longer negatively impact your life in the days to come.
Apart from the simple tips you can follow to improve your credit history, you must also adopt the habit of making sound financial choices. You can do so by avoiding the following:
Renewing your loans
Bills amounting to $159 that are overdue by two months
Transferring multiple credit card balances
Lack of desire to pay off or at least reduce your outstanding debt
These unhealthy financial practices will affect your credit score, which ultimately damages your credit history. Remember that lenders give a much higher regard on credit histories that reflect sound repayment habits, as this proves that you are responsible with the way you handle your financial obligations.