Having a low credit score can make you feel trapped because creditors will not lend to you. It can often be hard to get back on track but it is definitely possible. In this article, we will go over our top suggestions for how to fix your credit score fast. If you follow our suggestions you will find your way back to the right financial path.
The more credit you have available the better so be sure not to close any of your older accounts. Credit card accounts with a long payment history will help to boost your credit score. If you have a high balance on several of your credit cards you may consider consolidating the balances.
If you consolidate your debt into one payment, this will free up credit on your existing cards which will, in turn, improve your credit score. One of the most significant factors that affect your credit score is your available credit and how much of it you have used. You will also need to decide which is a better option for your situation debt consolidation vs credit card refinancing.
As a general rule, you should try to keep your balance at 20 percent or below your total credit available on each card. When you start to rack up debt and your balances exceed 50 percent or more your credit score will begin to take a hit. The credit agencies will start to see you as a higher risk of not being able to pay off your debts.
While having a lot of available credit is a good thing, we do not suggest having more than 3 or 4 credit cards. If you start to have more cards than this a few things can happen. The first scenario is you will never use the extra cards and the accounts will close themselves out. If this happens then your score could be negatively affected because your total available credit will be reduced.
The second scenario is you will start to spend on several cards at once, carry balances on them and not be able to pay them off. This could lead to bad credit card management and getting over your head in debt. Having 2 or 3 cards seems to be the sweet spot for creditors.
It shows them that you have a good amount of credit available and are a trustworthy individual. Be sure to rotate each card and pay off the balance of each one every month. If the cards are being used but do not carry heavy balances it creates a steady history and your credit score will continue to rise.
Regularly check your credit report and make sure there are no errors in it. Errors on your credit report are more common than you would think. In fact, almost 3 out of 10 Americans have an error on their credit report. Most people are not even aware of this but it is negatively impacting their scores.
Pay off an installment loan. One area that will have a positive impact on your credit score is when you pay off an installment loan. For example, paying off a car loan will help improve your credit. Even if you have the cash to buy a car in full, we suggest getting a loan for it and paying it off within 6 to 8 months. This will help boost your score.
We hope you enjoyed the tips we provided on how to fix your credit score fast. Sunbeam Financial has worked with hundreds of clients over the years and we have had a lot of success in improving their financial situations.