How to Heal Your Credit Score
According to Equifax, a good credit score is between 600 and 900. The higher the number, the more access you will have to new avenues of credit, major loans, and the like. If you’re looking at purchasing a home or making another type of large financial investment, your credit score will be one of the biggest factors in determining your eligibility. If your credit score is poor, it can be a challenge to meet those goals. Luckily, Albertans are not stuck with a bad score forever. Just as scores can go down, they can go up again. If you’re looking to improve your credit rating, follow these steps to get back in control of your financial future.
Figure Out What You’re Dealing With
Before you start cutting up credit cards and calling back the collections agencies, order a copy of your credit report. This won’t only give you your credit score, but specific information regarding how that score was calculated. First, go through it to check for any errors. If you find mistakes, you are within your rights to dispute them. Once they are removed from your credit report, your score will be adjusted. After this, you can take a look at what aspects are pulling down your score. Some of the most common are late or missed payments, high debt utilization, or not enough credit diversity.
Bring Your Accounts Back Up to Date
Once you know your specific problem areas, make a plan to bring all your accounts up to date. That means paying down credit; focusing on higher-interest loans. If you can’t reasonably meet all of your creditors’ requirements, call them and ask if there is some sort of arrangement you can make. Most creditors appreciate open and honest communication. In some cases, they may be able to lower your amount owing or give you more time. You won’t know unless you ask. If this is still too big of a challenge, consider a debt consolidation loan or something similar.
Rebuild Credit Through Manageable Means
After your debt is back under control, it’s time to rebuild your credit. The important thing here is to maintain that control. Ensure your debt is being paid down on time and you’re not spending more than you can handle. A great way to build your credit score is to raise the limit on your credit cards and try to keep your credit usage under 50%. For example, it will look better on your credit report if you have a $5,000 limit and are only using $1,000 than if you have a $1,000 limit and are using $500. This is because your credit usage rate in the first scenario is only 20%, while in the second scenario it is 50%. Diversifying your credit with another credit card or loan can also improve your score.
Having a low credit score now doesn’t mean you’re stuck with it forever. By following the steps above, you can work to heal your credit and create financially healthy habits. For more information on how to rebuild your credit, contact the experts at Source Mortgage today!