If you have ever borrowed money or used credit in the past, you have a credit score that reflects how well you handled the credit extended to you. In general, you score shows how much credit you currently have available to you, how much money you owe on it and whether or not you are making timely payments on your current accounts.
Would be creditors and lenders use your credit score as a predictor of how likely you are to repay any credit extended to you. If you usually make your payments on time, you will surely have a better than average credit history, and it will be easier for you to obtain a loan from a bank or credit union. Those with the best credit scores qualify for the lowest rates.
If you have a poor credit history, you’ll find it difficult to obtain a loan from any lending institution and when someone does extend you credit, you will be subject to higher rates and fees. If you find yourself in this situation, it’s not the end for you. You have the option of taking the necessary steps to reach your max credit score. The following tips will help you succeed.
- Create a solid plan and follow it. Be willing to implement changes and stick with it. Avoid making unnecessary purchases. Whenever you are making a purchase, ask yourself whether the purchase is affordable and necessary and only buy when the answer to both questions is a definite “yes”.
- Even if your bad credit has prevented you from obtaining credit cards, you may be able to get a secured credit card. These cards have a high approval rate because you must provide a security deposit to fund your credit limit. Used responsibly, a new credit card can begin to improve your credit score.
- Pay down credit cards and other forms of revolving accounts you have that are carrying a balance of over 50% of their credit limit. Ideally, you should carry balances of no more than 30%-35% of a revolving account’s limit. Carrying balances of greater than 50% of your limits, negatively affects your credit rating.
In conclusion, a bad credit history will not follow you around forever, but you have to learn what you need to know to improve it. You’ll also need the willingness to create a plan of action and the determination to follow your plan through. Improvement begins with knowledge, learn what you need to know about your credit and do what you need to do about it, and you’ll reach your max credit score.