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Many people have bad or poor credit score. This can happen as a result of unforeseen
circumstances such as a job layoff, sudden illness or emergency etc. If you find
yourself in the same situation, do you know what to do to prevent bad credit score
(under 600) and improve your credit rating?
A good credit score means a low interest rate that will significantly reduce your
monthly payments and save you thousands over the life of your loan or mortgage.
Ways to Improve Bad Credit Rating
You could start by looking at these outlets for bad credit accumulation – house loans,
car loans, rent, credit cards, monthly bills, checking accounts, and debit accounts.
Let's begin with your house loans and car loans. If you aren't making your minimum
monthly payment on them, your credit score will suffer considerably.
In general, it takes several months (as many as six) before lenders report good or
bad behavior to credit bureaus. If you've been delinquent on your loan repayments
in the past, contact your lenders immediately and see if you can work out an alternative
You can also ask for a "goodwill adjustment," which is when a lender will forgive
a late payment on the account depending on your relationship with the company.
If you don't have the money to pay, lenders will help you to work through some reasonable
system to avoid getting reported for bad credit. For instance, they may be able to
extend the period of your loan, decreasing your payment.
Additionally, they may give you the option to put up collateral and take out another
loan, decreasing your interest rate or your monthly payment amount. All of these
avenues are critical, as they will allow you to prevent dents on your credit score.
Next, let's take a look at your credit cards. If you want to remain in good standing
with all of your creditors, all you need to do is make the minimum payment on each
of your credit cards.
You do not have to pay them in full. Rather than paying the huge amount of money
you charged on your card, the only thing you will be responsible for is probably
$25 to $100 per month, but it is crucial that you pay that amount.
If you're getting slammed by a high APR, open a new credit account that has a 0%
APR trial period, transfer your balance to that card, and make the minimum payments.
Now, examine your checking accounts, debit accounts, rent, and monthly bills. Although
they have negligible impact on your credit, they should still be taken into consideration.
For instance, if you miss your rent or monthly bills, you can be reported to a credit
bureau. That explains why it's always important to talk to your lenders, rather than
ignoring them if you can't pay.
As for checking and debit accounts, always maintain a positive amount and only open
new accounts when necessary. Having a long history with your accounts will improve
your credit score.
Even if you no longer use a credit card or line of credit, keep it open. Closing
it could be detrimental to your score. You should also consider using it once every
six months to show activity.
Also, limit your applications for new credit because each time you apply an inquiry
appears on your credit report, which can also lower your score.
Having said the above, also learn to protect yourself from identity thieves. If you
notice fluctuations in your credit score monthly, it might indicate identity theft.
Make sure you look at every mail you receive and destroy those with sensitive information
or credit card offers. Identity thieves can damage your credit score in a matter
With focused effort, your credit score will start to improve fast. In fact, you should
be able positive to see results within 12 to 18 months.