Recent reports have found subprime credit to be a millennial problem. Nevertheless, there are those outside this category who find themselves in a similar predicament. If you have a credit score in the 500s or lower, you’re not doomed.
Financial circumstances may have consigned you to the status of a subprime borrower right now. There is hope! The road to better rates and more flexible terms won’t be easy. Nor will you be able to feel the changes immediately. But when you finally see that bright and shiny 800 on your credit report, you’ll feel the struggle will definitely be worth it.
Here are some steps you can take to turn that credit score from ‘poor’ to ‘excellent’.
Step 1 – Check your credit report
You need to have all the necessary info in order to improve your credit score. Start by requesting a copy of your credit report. Check the document for errors that may have pulled down your credit score. If you find any, dispute them with the appropriate credit bureau.
Step 2 – Pay your bills on time
If your credit report doesn’t contain any discrepancies, the next step would be ensuring that you manage those debts. Make a list of all bills. Mark when each one should be paid. Set up payment reminders on your computer or mobile device a day or two before they are due. This way, you never forget to settle them.
Step 3 – Keep your balances low
Utilization ratio, the amount of outstanding balances you have on all active credit cards divided by each card’s credit limit, is a contributing factor to your credit score. The optimum figure is at 30% or lower. You can achieve this by paying off your balances each month.
Some credit card issuers use the balance reflected on your monthly statement when reporting to the credit bureaus. With this, you could still end up with a lower credit score. See if your credit card issuer accepts multiple payments. Otherwise, pay a little bit more than what is due monthly.
If you have trouble making ends meet, it’s best to get in touch with your creditors early on or seek help from a legitimate credit counselor. This won’t hurt your FICO score and you’ll stand a better chance of managing those debts.
Good financial practices are crucial to credit repair. Over time, you’ll see an improvement to your rating. By then, it would make sense to talk to a loan expert about your options.