November 17 – Hispanic Solutions Group
Improving credit is not an exact science, so no one can tell you exactly when or how much your score will increase. But if you use these tips, you can progress and stay motivated along the way.
- Check your credit report
One of the most effective ways to improve your credit is to check your credit report and dispute inaccurate information. Credit report errors are common, and you may have accounts on your credit report that do not belong to you. If there are errors with derogatory marks, such as late payments, and you successfully dispute them, you could improve your score in a relatively short time. You can usually view your credit reports for free once a year at AnnualCreditReport.com, the only site authorized by the federal government to obtain free credit reports. But the agencies have made credit reports available weekly through April 2022 due to the COVID-19 pandemic.
- Set up automatic payments
Making all your payments on time is crucial. “If you don’t make payments, that will hurt your credit score very badly and very quickly and it will take some time to recover,” says Rod Griffin, Experian’s senior director of consumer education and awareness. “Late payments stay on the credit report for seven years from the date of the late payment and can lower scores during that time,” he explains. To reduce the risk of forgetting a payment until after it is due, set up your automatic payments linked to your bank account. As a bonus, some student loan and personal loan lenders offer discounted rates if you sign up for AutoPay, lowering your interest rate.
- Pay off existing debt
If you are looking for quick results, paying off existing debt may be the most effective way to increase your credit. Paying off credit card debt reduces your credit utilization. Once creditors report the new balance to the credit bureaus, you could see an increase in your credit score in as little as 30 days. Due to the great impact that paying debts can have, it is one of the most recommended ways to improve your credit. “If you have a windfall, hit your credit card debt,” suggests Block. “Not only will you increase your credit score by reducing your use of credit, but you will also save money because you will not pay as much in interest,” he says.
- Get a secured credit card
For those with bad or no credit, secured credit cards can be a good option if you need a credit card. Deposit a security deposit that acts as a credit limit. You can use the card for purchases, and once you reach the limit, you won’t be able to make another purchase until you make a payment. Over time, a secured credit card can help you build credit if you use your card responsibly and make all your payments on time.
- Apply for a credit loan
What if you start from scratch? If you have no credit history, you may want to consider a credit-building loan. When you open a credit building account, the lender moves the loan amount to a locked savings account. Make installment payments to the lender over a period of six to 24 months. As you make payments, the lender reports your activity to the credit bureau. At the end of the loan term, the lender delivers the funds to you. Just keep in mind that delaying payments can further damage your credit, as late payments are also reported to credit reporting agencies. According to the CFPB, participants who did not have existing debt when they took out the loan saw their credit scores increase by 60 points, an improvement sufficient for a borrower to enter a better score range. For example, someone with a score of 620 (Fair) could go up to 680 (Good), helping you qualify for better rates.
- Don’t waste your money
Many debt relief companies make great promises. But you must be careful. The CFPB issued a consumer advisory warning people about paid credit repair services. The fees these companies charge are often high, and you can achieve the same results on your own. Despite what some companies may claim, accurate negative information cannot be removed from your credit reports, Griffin says. So you could end up paying your hard-earned money for nothing. Instead, focus on keeping up with your payments, keeping your credit card balances low, and avoiding new lines of credit to improve your credit.
- Ask for help
If you have bad credit and are burdened with debt, contact a credit counseling agency. A certified debt or credit counselor can help you create a budget, develop a debt repayment plan, and even negotiate with your creditors.
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