Having a low credit score can affect your life in a number of ways. Your score can hinder your goals, such as owning a home or buying a new car. As a high-risk borrower, you'll have to pay higher interest rates on any loans you take out. A poor credit score can affect your ability to rent a house or apartment, and it can cause your insurance premiums to go up. You may even miss out on employment opportunities because of a low credit rating.
However, there is hope. Follow these steps to start improving your credit score right now.
1. Keep Your Credit Card Balances Low
Having a large amount of outstanding debt reflects badly on your credit rating. Try to keep revolving credit accounts paid down. If necessary, pay more than the minimum payment for a while to reduce the balance. Credit ratings suffer when you're constantly charging purchases on your credit card.
2. Pay Off Your Debt
This is easier said than done. However, making every effort to get rid of old debts will pay off all over again in the form of a higher credit score. Debt consolidation can be helpful, depending on your situation, but be mindful of shuffling your debt around as opposed to actually paying it down.
3. Pay Your Bills On Time
Late payments and collections activity can wreak havoc on your credit score. Pay all your bills on time. If payday comes after an important due date, call that creditor and find out if your due date can be changed. Sign up for automatic payments to have your bills paid directly out of your checking account each month so you won't ever forget to make a payment.
4. Don't Apply For Credit You Don't Need
People who are trying to build up their credit score will sometimes open as many lines of credit as possible. This isn't the best strategy, though. According to Experian, doing this won't necessarily improve your credit score. It also puts you at risk for going further into debt.
5. Live Within Your Means
With the availability of credit comes the temptation to overspend. It's easy to spread yourself too thin financially and end up with a bad credit rating. If you find yourself in the negative each month, it's time to sit down and get serious about overhauling your budget and spending habits. By spending less cash and using less credit, you'll be able to pay down your existing debts and get your head above water sooner.
If you want to take control of your credit, the experts at Coosa Valley Credit Union can help you create score-boosting strategies that work with your budget and lifestyle.