With your credit score down in the dumps, it may seem like the only way is up from here. But raising through the ratings doesn’t come automatically. It’s the result of hard work and patience.
You’ll have to climb out of bad credit by making deliberate financial choices to impact your history positively.
If your score isn’t where you want it to be, check out the advice below. Here are good money management tips that may impact your history.
Check Your Score
First things first, it’s helpful to know where you stand. Take advantage of your free checks with the government to find out what three-digit number you have.
Checking this file will help you understand the type of information that impacts your score. Once you identify the negative entries you don’t want to repeat, you can figure out your weak spots.
It also gives you a chance to spot any inaccuracies that may be bringing down your score unfairly. Simple errors or instances of identity theft may be the reason why your score is low.
If you see errors, file a dispute right away. The faster you start this process, the sooner you’ll have these mistakes removed.
Pay Your Bills on Time
When a financial institution checks your score, they’re assessing your creditworthiness, as advised by My Wealth Solutions.
In other words, they’re weighing the likelihood you’ll pay back their loan or line of credit.
A record that shows you pay your bills on time, every time, is a good start to impressing your financial institution. This habit will lay down a positive payment history.
Keep a Low Utilization Rate
Another important metric that some financial institutions check is your utilization rate. This number shows how much of your line of credit limit you use from month to month.
A high utilization rate suggests you’re relying on revolving accounts often, and you’re carrying over balances regularly.
Generally, a low utilization rate means you have a good handle on your finances. It indicates you’re balancing your budget, so you don’t have to tap into your line of credit often.
One way to achieve this is by paying off your balance in full on time every month. Another way is by reducing your reliance on these revolving accounts altogether.
Financial Institutions like CreditFresh recommend only using a line of credit for emergencies. They suggest keeping your account in standby for unexpected emergency expenses, so you don’t use up your limit on everyday expenses.
This way, you’ll keep a low utilization rate and have more of your limit available if a financial emergency strikes.
How Long Does it Take to Improve Your History?
How long does it take to complete a 10,000 piece puzzle over the winter holidays? It depends on your patience and commitment to putting every piece together.
The same goes for your score.
It too relies on several puzzle pieces that, once put together, provide a snapshot of your borrowing behavior. You need to spend time with each factor to make sure you have a balanced approach to your finances.
It could take you months, or it could take years. It depends on how low your score is, and how committed you are to making a change.
Are you ready to start the journey towards a better score? Good luck!