Although recovering from bad credit is easier said than done, to be truthful, there are many practices you can exercise to regain and ultimately, rejuvenate from bad credit. Whether you are a student or an immigrant who has no credit history, or a person who currently has bad credit, don’t be alarmed because there are many things you can do to repair and even improve your existing credit score. There is no such thing as instant relief concerning credit, especially if you have bad credit. However, by following these practices, you are sure to regain and improve your credit score at a pace which may not seem all that bad.
How to improve credit score
Be wary that there are many ways to build credit and improve your credit history. These practices are mainly beneficial for anyone who currently has no credit history or anyone who is currently facing bad credit. Many people believe that a person who has no credit history at all is just as bad as a person with no credit history. That is why most financial experts recommend college students and even immigrants, to exercise their right to legally own a credit card and have their own credit history and to build their credit history whenever they get the chance to. Some examples of opportunities of ways someone can utilize to improve their credit score are:
- Charge only what you can afford to pay
- Never max out your credit card
- Pay what you owe in full and on time
- Start simple and use only 1 credit card
- Don’t make too many queries, especially if you have been declined multiple times
- Use a co-signer
- Use retailer programs
- Receive a student credit card
- Get a department credit card
- Ask for a secured credit card as a last resort
- Charge only what you can afford
Many banks want to verify that you are able to pay them back on time. Thus, it is a good habit to charge only what you can afford from reaching excess debt or making purchases you aren’t able to afford.
Never max out your credit card
It is extremely important, especially if you have a limit on your card, that you do not come close to maxing out your card. This can alarm your creditor and discredit their trust in giving you a loan.
Pay what you owe in full and on time
By paying in full and on time over a span of time, can help backup and enforce that you are a reliable borrower to a bank. That is why it is extremely important to pay up before the deadline and not cheat yourself of an opportunity to improve your credit.
Start simple and use only one credit card
Starting with more than one credit card can create complications and temptations, which can lead to excessive buying, or something of that nature. Also, although there are many promotional offers which may entice you to open up a new credit card, sometimes the bad can out weigh the good and do more harm. Reason that I say that is because banks tend to be suspicious if a person opens several credit cards over a short period of time. If anything, if you know that you are in need of a loan soon, I’d advise to stay away from this activity.
Don’t make too many queries
If you are in need of a loan and you have been declined multiple times, it is advised not to go looking for another bank unless you know you have a good chance of carrying out a loan with your current existing credit score. Otherwise, having too many queries can create red flags on your credit history and overall discredit everything you had built up. A good practice is to view your credit report before requesting a major loan you think you may have a chance of not getting.
Use a co-signer
Generally with new college students who are now able to legally have their own credit card, they opt in with a co-signer. What this means is that they get someone, usually their parents or relatives, to ‘vouch’ for them to give them some level of trust so they aren’t just a ‘blank slate’ in the creditor’s eyes. However, be warned that being a co-signer comes big responsibility. At any given time, if the person the co-signer vouchs for fails to pay a payment, it may also negatively affect their credit score which can cause major headaches and complications.
Use retailer programs
Generally if you purchase high priced applications such as purchasing a refrigerator, there is generally a retailer program which you can enroll in where you basically pay monthly, similar to having a mortgage for a house. Retail programs that are made available for you can contribute to building up your credit score and previous loans for purchasing a car or housing, is also considered in your credit history. So if you are able to pay in full and in time, these programs can generally improve your credit score.
Receive a student credit card
If you are a student, your best bet of starting your credit history is with a student credit card. Reason being, students are eligible to receive the card and generally gives students a resource to spend money. But, try to approach it the other way and use this as an opportunity to build a positive credit score by using the card only to purchase things you can afford. This ensures you won’t spend recklessly and fall into the trap most college students get themselves into, which is excess debt.
Get a department store credit card
If all else fails, get a department store credit card. Generally stores want customers to apply for their department store credit card. Reason being that customers with it, are generally more likely to purchase from their store. Most department store credit cards have a limit of $500. Take this as an opportunity to handle your finances and to build a positive credit history for your self by applying for the department stores you can’t live without.
Ask for a secured credit card as a last resort
Last but not least, you can ask for a secured credit card as a way to improve your credit score. A secured credit card is a lot like a debit card, except you’ll usually pay a bit in fees as a way to show banks that you are able to pay in full and then some. So you speak, you are paying the banks extra to show that you are able to maintain your finances and when it comes to providing you a loan, you are a safe bet. Generally secured credit cards are regarded as a last resort because of the extra fees attached to the card. However, it can be a method you may consider in building your credit if you are in need of a loan anytime soon.
Building credit doesn’t have to be intimidating. By following these practices, you are able to positively grow your credit history overtime. It is recommended to follow these practices and habits even though you may not currently think you need a loan. Remember, having good credit is considered an asset and when the time comes, can save you hundreds and even thousands of dollars when you receive a loan from a bank. Also, another thing to take into consideration is that for most insurers, they now take into consideration your credit score and can negatively, or positively impact your insurance rates. So my recommendation is to build credit whenever you get the chance to before it is too late, or else you will be sorry.