Bad credit can be a real setback to your overall financial credibility. It can influence your ability to secure loans, credit cards, and favorable interest loans. If you have found yourself with a less-than-fair credit score, you will have to improve it as soon as you can.
While there are many surefire ways to do it, these ways often come with ending up paying more interest rates. This is the reason we have built a strategic plan specifically for people fighting with a bad credit score.
Below in this article, we will explain how you can improve your credit score within a reasonable timeframe of as little as 12 months. Keep reading to find out useful insights.
Know Your Starting Point
The first step in any credit improvement plan is understanding where you currently stand. To find this, you will need to get a copy of your credit report from each of the major credit bureaus. When you have obtained this copy, make sure to review it thoroughly and find any potential errors.
While this credit report is compiled with extreme care, there are still some instances where there are inaccuracies and errors. All you have to do is pinpoint these errors and report them to the bureau. They will recheck the report and provide you with the updated one.
Address Negative Items
By having a look at your credit report, you will be able to identify which items are dragging your credit score down. These may include late payments, collections, charge-offs, or bankruptcies. Each negative item has a different impact on your credit score, and addressing them strategically can result in positive outcomes.
Prioritize tackling these issues, considering options like negotiation, settling debts, or setting up payment plans. By doing this, you will soon be able to find yourself out of bad financial health.
Set Up Automatic Payments
To avoid late payments on your loans and credit cards, consider setting up automatic payments for your bills. This ensures that you never miss a due date and helps establish a positive payment history. This positive payment history is one of the most important factors in calculating your credit score.
Many creditors and service providers offer automatic payment options through online portals. This makes it even more convenient to stay on top of your financial obligations.
Get a Personal Loan
In some cases of bad credit scores, taking out a personal loan can be a strategic move to consolidate high-interest debt or address immediate financial needs. Personal loans are installment loans with fixed monthly payments, and successfully managing one can contribute positively to your credit score.
However, it’s important to carefully assess your ability to repay the loan and explore options with reasonable interest rates and terms. There are many platforms like Lantern by SoFi that mention loans for bad credit to help people with bad credit scores make an informed decision on taking out the right personal loan according to their needs.
Negotiate with Creditors
Don’t be afraid to reach out to your creditors to discuss your situation and explore options for more favorable terms on your outstanding loans. Some creditors may be willing to lower interest rates, waive fees, or negotiate settlement amounts.
This open communication can lead to mutually beneficial agreements and alleviate some of the financial strain. Your creditors will also guide you in diversifying your credit portfolio to improve your credit score. While their advice may be of help, be careful not to overextend yourself and only take on new credit when it makes financial sense.
This will significantly contribute towards improving your credit score while also minimizing the risk.