You’ve been struggling with credit problems for a while and have finally come to the realization that the situation can’t go on for a second longer. Now that you are finally ready to make a change – how do you proceed??
Well – if you are looking to improve your credit situation – here are 3 steps you can take that will relate the future health of your credit score.
1) Learn More About How a Credit Score is Determined
A lot of the time the errors we make when managing our credit are actually small, so much so that we might not even aware of how negatively they can affect a lower score. While other times it may be larger credit mismanagement that occurs, either way knowing what type of specific credit information will shape your credit score is an extremely important part of improving your overall credit.
First of all, you will want to know what the specific number means. Typically, credit scores will range from 300 to 850. While numbers nearing 300 are considered low, those as high as 850 reflect a score in the excellent range. If you have a score that is 720 or more, your score is deemed good and is an realistic place to be as it can also enable borrowers to obtain the most favourable rates – as well as larger sized loans.
In addition to what your actual score means, it is also important to be aware of what types of credit transactions go into determining your score. Overall, some of the most relevant credit behaviours that reflect any given score, will include situations such as, how much debt you owe, how reliable is your payment history, how many assets do you have, i.e., a house, a steady income, retirement & savings plans, etc. All in all, the ratio between income & assets versus how much you owe will also play a role in your credit rating level.
The message here is, in order to turn your credit situation around for the better, it is best to have a good understanding of what factors will impact your score. Knowledge is power – and the more you know about what makes a credit score tick – the more efficient you can be managing your credit. As well, you will be be able to learn more about which specific credit habits you need to change in order to start seeing your credit score rise.
2) Devise a Plan for Rebuilding Your Credit
After you haven begun to gather insight into what constitutes a credit score – next is to take a look at how you can move forward and put into place a credit score rebuilding plan of action. While there are a lot of different existing plans, the trick is to find one that will be the most suitable and realistic for you and your personal credit situation. While initially, a larger credit rebuilding plan may not be feasible for you – instead you could start out smaller and work up to something a bit more complex.
Take your payment history, for example. If you have found that you have a habit of missing payments and as a result your credit score has suffered – then devising a plan to get back on track with your payments can be a good method of beginning to advance that score. While it may only be one small step – it may be one credit management tasks that is within your abilities and also one that can make quite the difference.
By paying your bills on time, over time – you demonstrate to creditors that you can effectively pay off your loans and on top of that, you are still paying off some of your debts – so after all, things are still going in the right direction and already looking up.
3) Start Paying off Your Debt (as soon and as much as possible)
Now that you have more knowledge of credit scores as well as have started making some leeway in changing your credit management behaviour – here is where you will want to take a closer look at your total amount of debt.
As it stands, your credit score is significantly affected by how much debt you owe versus how much savings and income you have and this is one of the many reasons why keeping your debt as low as possible is so important. If, for example, your debt levels far exceed how much income and assets you have – your credit score can be impacted quite negatively.
Furthermore, if you try to go and access more credit, you could be denied the loan you need – and as you already know, in the event you are approved, then sometimes lower interest rates will also be out of your reach until your credit score starts to go up. Therefore, if you can manage to look at another method of lowering your overall debt loan at a faster rate – then your credit score should also begin to increase and you can create more loan options for yourself in the future.
If it is your goal to boost your credit score – there are some important actions you can take to make this happen. Ultimately, even if you start by changing up some key credit management behaviours, even a little – then this can help you optimize your credit rating even further.
Lastly, thinking about the future of our credit score, whether that means tomorrow, 6 months from now, or even further down the road – always looking ahead and finding additional methods of improving your overall credit situation is a necessary mindset to maintain.