You may be able to prevent forming debt simply by knowing exactly how much you owe and to whom. There is no better time than now to work on repairing past mistakes that can be adversely affecting your credit rating. Here are some relatively easy and effective ways to improve your credit.
Try to keep a balance of less than 50% of your available credit on all of your cards. If you let your balances get too high, your credit rating will drop significantly. You can either spread your debt out by transferring some of the balance to low interest cards, or better yet, pay off as much as you can.
Interest Rates
The first step in repairing your credit is figuring out a plan that works for you, and sticking with it. Real changes come from commitment to healthy spending habits. You should only purchase the necessities, and skip the impulse buying. Before you open your wallet ask the questions “do I need this?” and “can I afford this?” If the answer is no to either, put it back on the shelf.
If your creditors try to jack up your interest rates, do not pay them. An interest rate that is shockingly high can possibly be ruled as illegal in certain cases. Your initial agreement likely included a commitment to pay interest. You need to be able to prove the interest rates are too high if you want to sue your lenders.
Many credit card companies are willing to help customers by eliminated late fees or lowering monthly payment amounts. This prevents you from sinking further into debt or further damaging your credit score. This can be accomplished by negotiating with them for a change in due date or monthly charges.
Call your credit card companies and request that they lower your limit on your cards. This will prevent you from spending too much that you do not have. It will also show the credit companies how responsible you are, and if you do need to get more credit in the future, you will have a much easier time.
If you have credit cards with a utilization level over 50%, then pay them down until they are below 50% utilization. If any of your balances climb past half of your available credit limit, pay them down or spread the debt around other accounts, otherwise, your credit rating gets tarnished.
Credit Unions
Credit unions are an option for those who have run out of options when trying to find a line of credit to boost their score. Credit unions can often offer better rates and more alternatives than larger banks, because they base their decisions on the local economy instead of the national situation.
If you are able to get a payment plan worked out with any of your creditors, make sure you get the terms in writing. This will provide proof of your agreement in case any problems ever arise. If you manage to pay off your debt, make sure you receive proper documentation as proof to send to credit reporting agencies.
A respectable credit score makes it much easier for you to purchase a home with a mortgage. Making regular mortgage payments will also help your credit score. Owning your own home gives you a significant asset to use in securing your finances, and your credit score will reflect that asset. If the need arrives to obtain a loan for any reason, this will be a valuable asset for you.
Pay off any balances as soon as you can. It is a toss up as far as which cards are best to pay off first – some choose ones with the highest interest rate, others choose the card with the lowest balance. Doing so shows your lenders that you are responsible.
These are ways of protecting your credit rating. Whenever you fail to make your payments on time, your credit report is affected negatively. This can make it very difficult for you to take out a loan in the future.
As should now be apparent, most of what’s required to get you out of debt in order to salvage your credit is simply common sense. Following these simple steps and credit score repair will no longer be a distant dream.
Don’t risk prison. There are various online scams that involve creating a fresh credit file. Of course, this highly illegal, and it will cause you even more problems, because it will not go unnoticed. You could go to jail if you have a lot of legal issues.