Life gets hectic sometimes. It happens to all of us. An unexpected expense or financial misstep can result in drawing out our lines of credit and damaging our credit score by being unable to pay back the money on time. This defacement of your credit score doesn’t have to be permanent, however. Some websites like BWCCU keep a consistent list of both tried and true, as well as brand new ways, to boost your credit score back to its pre-fall numbers.
Poor credit can come back to haunt you in the form of denied loans, an inability to get an apartment or house lease in the place of your dreams, or increased interest rates on any loan you secure. Bad credit can effectively change your life in many ways. It acts like an invisible wall, stopping you from having the things you’d like long after you’ve paid off the debt that firstly ruined your credit score.
Here are a few effective steps to fix your credit score:
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Keep Credit Card Utilization Rate Low
Your ability to consistently use and pay off your credit card is a major indicator of how financially stable you are to creditors. Your overall credit limit isn’t what’s important here, but how much of that limit you use.
You should aim to keep your outstanding balance under 30% of your total balance. What I mean by this is that if you have a credit limit of $1000, never have more than $300 on your credit card bill. Keeping your utilization rate low shows that you aren’t strapped for cash and can manage your limits in a responsible way.
Pay Off Outstanding Debt, No Matter How Small
Some people choose to keep their overall utilization rate of one credit card under 30% by spreading their purchases around on multiple credit cards. Credit bureaus are wise about this practice and as such, outstanding balances of any kind negatively affect your credit score. Sometimes, owing three creditors minor amounts of money can hurt your credit score more than owing one creditor a significant amount.
Check any outstanding debts you have on credit cards or any bills in general. Pay them all. After this, stop using those extra credit cards and settle on only one or two cards that you use for everything. Credit pollution is a very real thing, not to mention small balances that you have forgotten can eventually balloon into major sums of money, thanks to high interest rates.
Stay On Top Of Your Finances
Both of the above methods are surefire ways to increase your credit score, but they are long-term solutions. If you are not in control of your spending habits or are not prepared for an unexpected expense, you could end up right where you started and would have to restart the entire process.
Budget properly by understanding how much you will have to spend each month on bills like rent and electricity, while also trimming the fat from your monthly budget, so you’ll have an emergency fund available when you need one.
Slow And Steady
Follow these tips and you’ll minimize your chances of slipping back into debt and having a perpetually bad credit score. Changes won’t happen overnight. Proving to creditors that you are good with money is difficult to do once you’ve already lost points on your credit score, but it is possible. People do it every day.