Your credit score is important in many ways. Unfortunately, being tagged with a low credit score is a burden that falls on those who can least afford the financial burden it carries.
There is no quick and easy way to dramatically raise your score. It takes patience and persistence. Think of the old fable of the tortoise and the hare where slow and steady won the race. Attack your poor credit score in the same way using some of these creative ways:
1. Take out Credit and Repay Quickly.
If you have terrible credit because of a bankruptcy or some other financial problem, you can improve your credit score by taking out a small loan that you can handle. Then open a savings account at another bank and borrow against it to pay off the loan quickly. Assuming the loaning bank reports to repayment to the credit bureaus, you will receive positive feedback to help boost your credit score.
2. Be Cautious of Credit You Don’t Use
Credit card terms are constantly changing. Credit cards that were once fee-free may have suddenly changed to one that adds a fee to your card balance. If you are not paying attention to your monthly statements, you could be racking up bad credit points by not paying on required due dates. This is especially easy to do if you’ve opted to go paperless and only receive electronic statements.
If you are maintaining too many accounts to monitor, close out some of the extra accounts. Even though closing an account can cause a small dip in the credit score because you’ve lowered your total limit, the action will pay off in the long run.
3. Pay Off the Delinquent Debts First
When choosing which debts you should attack first in your attempt to improve your credit score, pinpoint the oldest debts and any debts that have been flagged as delinquent.
Under previous methods for calculating your credit scores, the delinquent debt was counted against FICO score. Newer rules see an improvement in your credit score when you pay off the debts that are already in collection.
4. Pay Credit Balances at the Right Time – Find out when your credit card company issues their reports to the credit bureaus, then time your payment so they arrive just after those dates, not before.
Why you ask? For example, the bank that issued you a MasterCard may report on the third day of the month. If you’ve paid your balance off before the third day of each month, you end up with a lower loan ratio than if you waited and paid on the fourth day. Although this seems contrary to logic, that’s the way the credit system works. The higher your balance, the more positive it is towards a higher credit rating.