8 Ways to Build Your Credit Score
8 Ways to Build Your Credit Score

Millions of Americans have low credit scores. A low score makes obtaining loans to purchase a car or home difficult. It can even impact whether you get hired for specific jobs.

Several things can lower a credit score, such as not making monthly payments on a loan or debt on time. Once you have a low credit score, it can be challenging to get it back up again.

Fortunately, you don’t have to live with a poor credit score forever. Below are the eight best ways to build your score to an excellent range again.

1) Paying Your Rent 

Rent payments were never traditionally a way to improve your credit score. Landlords don’t report on-time rental payments to credit bureaus like Equifax and TransUnion.

Of course, if you don’t pay your rent, your landlord will ruin your credit after they evict you through the courts. Is that fair?

Fortunately, there is a way that renters can improve their scores when making their rent payments on time.

Each time a monthly report of your rental fee is submitted, it will improve your credit score.

2) Start Paying Your Bills on Time 

You may have missed bill payments in the past, but that has to stop now. If you ever want any chance of building your credit score again, you have to start paying your bills on time and never miss another payment.

Contact your creditors if you need to renegotiate the monthly payment amounts. Creditors usually agree to renegotiate because they would rather you make your payments than default on the debt.

3) Open a Secured Credit Card 

Are you having trouble obtaining a credit card because of your poor credit score?

Well, the solution is to open an account for a secured credit card. You don’t need a good score for a secured credit card because you must put your own money down as collateral.

A secured credit card requires you to fund the card with a small amount, such as $500. Spending that money on the card and monthly payments toward the balance will build your credit score.

4) Request Higher Credit Limits 

You can improve your credit score by requesting higher credit limits on your credit cards.

The credit utilization ratio compares the amount of available credit to the amount owed. So, if there is a wider gap between these two amounts, then it helps improve your score.

Just make sure you don’t spend the new credit you are given.

5) Don’t Pay Off Loans Too Quickly 

It is silly to think that paying off loans too quickly can hurt your credit score, but it is true. Paying a loan off too quickly won’t establish your credit history, which means it won’t improve your credit score.

Credit bureaus want to see a consistent pattern of on-time payments made on loans over a long period. That is how you build credit.

6) Don’t Take on Too Much Debt 

Don’t request more loans or credit cards than you need. Too many open debt accounts can hurt your credit score.

This is regardless of whether you make your payments on time or pay off the account balances.

Keep your essential accounts only, such as your mortgage, car loan, and secured credit card.

7) Take Out a Debt Consolidation Loan 

If you already have several outstanding debt balances with multiple creditors, a debt consolidation loan is the best way to pay off those debts and reduce your interest payments.

A debt consolidation loan pays off all the other creditors, so you don’t have numerous outstanding debt accounts.

Instead, you’ll have one debt account for the debt consolidation loan that you’ll have to pay back.

It is easier to make payments on one loan rather than several loans. This could be your best chance of repaying your debts and building your credit score.

8) Check Your Credit Report for Errors 

The U.S. government gives every American consumer the right to request one free credit report per year from each of the three major credit bureaus: Experian, Equifax, and TransUnion.

Request your free credit reports and check them for errors. Sometimes you may find an unexpected error affecting your credit score, such as unreported payments that hurt your debt account status.

If you find these errors on a report, file a dispute with the credit bureau regarding the mistake you found.

Conclusion 

As you can see, there are many ways to build your credit score back up. All you have to remember is to be responsible with your money and not take on new debt unless you can afford to pay it back.

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