If your credit card or loan applications are getting denied, it may be due to your unfavorable credit score. Although credit isn’t exactly easy or quick to build back up, you can follow our tips below to help get you started.
1. Understand Your Credit Score
Credit scores come in a range of numbers, or points, from 300 to 850. Generally speaking, the higher your score is, the better off you are applying for credit cards, loans, etc. However, the score itself is based off how good your financial standing is on your credit score, loans, and other debt you may have collected previously.
You can get a better understanding of what your individual credit scores are by requesting a free copy from the three main credit bureaus, Experian, Equifax, and TransUnion.
2. Dispute any Errors on Your Credit Report
While looking through your credit report, if you notice any errors on your report, you should dispute them to your credit-reporting agency with a reason why you think it’s an error. It’s always wise to send in additional documentation supporting why your case should be accepted and ask for the error to be corrected immediately. You should also contact the debt collector to let them know that you’ve disputed the information and ask for any other documentation to be sent to the credit-reporting agencies.
3. Be Careful of Your Credit Card Balances
A huge factor to your credit scores is how much credit you’re actually using. For example, the less you owe on your credit score, the higher your credit score will be. You should aim to keep your credit card balance at 30 percent or lower. If you find yourself in trouble with a hefty credit card balance, you should consider transferring your balance to a personal loan with lower APRs to help out your credit score.
4. Make Sure to Stick Old Debt on Your Credit Report
Most people believe in the misconception that leaving old debt on their credit report is a bad thing. However, even though some old debt may negatively impact your credit score, it will disappear on its own after seven years. Arguing a credit-reporting agency to lose old debt on your report simply because you paid it off is never a great idea. Simply put, the more extensive history of debt you have on your credit report, the better your score will be.
5. Pay All Bills On Time
Even one or two late payments can negatively affect your credit score. Make sure you are paying all of your bills on time every month. This is one of the easiest steps you can take to boost your score. Plus, think of how much money you will save in late fees. Most credit card companies and other lenders won’t report a late fee if it is less than 30 days overdue. However, it is still a good idea to pay on time so you don’t get stuck with late fees or develop any bad habits.
6. Consider the Length of Your Credit History
The credit rating agencies also take the length of your credit history into account. If you have had a credit card for a long time and used it responsibly, it looks good on your report. On the other hand, new accounts typically work against your favor. It is even worse to open multiple credit accounts in a short period as this will lower the average age of your accounts and lower your score.
7. Open a Secured Credit Card
One of the easiest ways to increase your credit score is by obtaining a new line of credit and making on-time payments every month. However, getting a new line of credit can be difficult if your score is already low. This is where a secured credit card comes in. To obtain one of these credit cards, you pay a deposit to the lender, who then opens a line of credit for the same amount. By spending a little bit and paying the card off in full every month, you can improve your credit score rapidly.