this is a collaborative post
When it comes to managing your finances, your cash flow and what’s in your bank account aren’t the only things that matter. If you have any plans that involve buying a house, a car, or starting a business with a loan, your credit is going to play a large role. But if you’ve developed a pretty bad credit score over the year, you’re not entirely out of luck. Here are a few ways you can start healing your credit.
Source – CC0 License
Make sure your record is correct
The very first thing you should do, if you’re concerned about your credit, is to get a copy of your credit report. Every single person with a file on record is entitled to get a free copy of their credit report each year. Aside from getting a better idea of what your credit looks like, you can also point out inaccurate records that might be affecting your credit score, such as debts that have been long settled or incorrectly attributed to you.
Don’t close your accounts
If you have been paying off debt, especially things like overdrafts in second and third bank accounts, or credit cards, then you might be tempted to close those accounts so the temptation to dip back in isn’t there. However, you should avoid that temptation. If you have a credit account open but you’re not deep into it, your credit will benefit from what’s called a low credit utilization rate. Simply put, not overusing your existing accounts is better for your credit than closing them.
Use specially designed credit accounts
A low credit score will mean that most loan providers won’t do business with you. However, there are some arrangements like secured credit cards and debt consolidation that are designed specifically for those with low credit. By putting assets like a car on the line, you can gain access to a loan that, when you pay it off successfully, allows you to start building something of a credit history.
Be careful not to apply for too much at once
If you’re looking for a loan, credit card, or other credit agreement, then you might think to try in multiple places. However, it’s best to compare and choose options before making any applications. When you apply for a loan, the provider performs what is called a hard credit check, which appears on your credit report. As such, if your application is rejected, it can hit your credit score. It’s best to avoid applying to too many cards and loans at once for that reason. Credit companies can also see if you’re making too many applications, which could be a sign of financial distress, meaning you look like an unreliable borrower to them.
With the tips above, you can start to heal your credit, meaning institutions like banks and the like will be more likely to do business with you in future. Just do your best to stick to the terms of those agreements so your credit isn’t endangered again.