In the first part of the article series, we understood how FICO score is calculated. We also saw the course of action to rectify an error. Now, we will discuss ways in which we can improve your credit score. Ways which will turn your bad credit into pristine credit.
Improve Your Score with These Tips
It’s not your destiny to suffer from high interest rates for the rest of your life. Your score is only a snap shot of your present economic strength. You can always work on it and improve.
Juggling work and family is a tiring process. It is very difficult to keep up with all the payments. So, set reminders via e-mail or SMS. Several banks provide payment reminders also. You can make use of them. Another way is to pay automatically through your bank account. This will save your time and make sure that your payment is never delayed.
PAY BILLS ON TIME
Late payment is considered a sin in the process of improving your credit score. But, it is really hard to keep up with them. So, here’s a tip for you.
I perfectly understand that making all the payments is very difficult in this economy. So, you can go for Preferential Payment.
Pay for only those bills which are reported to the credit bureau. There are few bills which can be paid later. You will obviously be penalized for late payment but it will have less impact on your credit report.
Such bills include:
>> Utility bills like Cable, electricity, water, cell phone
>> Medical Bills
>> Payday loans
This tip is useful when you are totally tied up and cannot live skor
pay. This doesn’t mean you should stop paying the bills. If you do so, there are chances of the collection agency getting involved. This is bad for your credit report.
INADEQUATE CREDIT FILE/HISTORY
Having an inadequate credit history will definitely have a negative impact on your credit score. If you have a good credit history, anyone will offer you a loan. But if you don’t have any history, how will the lender determine your credit worthiness?
So, if you have any creditors who do not report your credit history to the bureau, ask them to do so every month.
This will gradually help you develop a credit history.
KEEP YOUR ACCOUNTS “CURRENT”
Keeping up with payments is almost impossible today. So what you can do is call your creditors and ask them to keep your accounts “current”. Negotiate lower monthly payments and make sure you pay it regularly.
*PAYING OFF THE ENTIRE DEBT
Sorry to say so, but paying off the entire debt won’t improve your credit score IMMEDIATELY. You may think of getting a consolidated loan and paying off all the negative items on your report. But don’t make such a mistake. It is because no matter what you do, any late payment will stay for as long as 7 years. It is better to concentrate on making payments of loans and accounts with higher interest rates.
I do not mean to say that paying off loans is not a good idea. You need to understand that a proper debt management plan is required to get you out of bad credit. You just cannot pay haphazardly because it won’t do much good to you.