After writing about credit repair scams, I thought it would be timely to add more information on how to improve your credit rating without getting taken in by one of the scams or companies that will charge for services you can undertake for free, or with little cost.
Here are 4 ways you can take positive action to improve your credit rating –
- Reduce your credit card debt
- Pay bills on time
- Wise use of credit cards
- Use a secured credit card to improve credit history
Reduce your credit card debt
Credit scoring typically involves a calculation which is based upon the amount of debt you have in relation to both your income and the credit you already have available.
Obviously then, having several maxed out credit cards can be quite damaging to your score.
If possible, make all repayments on time and if you have any spare cash then make it a priority to try and clear one card’s balance at a time.
If you can only ever afford to make the minimum payments then you may need to source additional means of income or determine ways of minimising your expenditure.
Pay bills on time
This statement may seem obvious but did you realise that making payments more than 30 days late gets recorded as a default and places a red flag on your credit report?
As credit scoring is weighted more in favour of recent activity, paying bills on time can go some way to improving your rating.
Wise use of credit cards
For some people who are in debt, consolidation may be a viable and essential option. However, placing monies owed on several credit cards onto one new card would mean that the debt to available credit ratio would be much higher, thereby lowering your credit score.
Also, the older a card account is, the more weight it carries. Therefore, it may be advisable to keep old credit card accounts open, even if the balance has been cleared in full.
Use a secured credit card to improve credit history
This option may be a possibility for those with extreme credit problems who cannot get a regular credit card.
By depositing a sum of money in advance you can then obtain a credit card which draws upon these funds.
Doing so may incur high fees or charges if you find yourself owing more than the amount you deposited but, with careful control, can be utilised in improving a credit rating as the card issuers report to the credit bureaus on a monthly basis.
Repairing your credit rating can be a time consuming process, typically taking a year or more of sound financial control and practice.
There is no quick fix and anyone who offers you one is probably operating some sort of credit repair scam.