Did you make financial mistakes when you were younger that have resulted in you having a bad credit score and credit history? Countless people have been in this position, and now they struggle to qualify for loans – and when they finally do obtain one, they have high-interest rates leveraged against them. It’s an unfortunate outcome for those who have genuinely learned from their mistakes. However, all is not lost. There are options out there if your credit score is low. Read on to find out what they are.
Cut Down on Credit Card Usage
One of the main ways to improve your credit score is to use your credit card less. You’re essentially spending money you don’t own whenever you use it, which might lead banks to think poorly of your character. Therefore, it’s best to use your credit card rarely or for large one-off payments, like booking a holiday. This way, if anything gets canceled, you haven’t lost any money. Other than these types of purchases, you should avoid using your credit card as this will improve your credit score over time.
Co-Signers and Co-Borrowers
The main disadvantage of having a bad credit score is how it affects your ability to obtain a loan. It makes you look financially irresponsible to loan companies, and they won’t want the hassle of getting money back from you. However, if you have a co-signer or co-borrower with a good credit score apply for a loan alongside you, you’re in with a better shot at receiving the money you need. This second person usually acts as a guarantor, so loan companies can feel assured they’ll have their capital returned. If this is something you are considering, you can read more about it here.
Punctuality with Payments
Your credit score is significantly impacted by your reliability. This means it is essential to always pay your bills on time. Ensure that you do by making reminders, setting up standing orders, and paying the amount a little before it is due, just in case something impedes the transaction. The more reliable you are, the higher your credit score, in turn increasing your chances of qualifying for a loan with lower interest.
Paying off Debt
How are you going to reimburse a new loan if you are still paying off the old one? That’s the kind of question loan companies will be asking. Nothing affects your credit score more than mass debts or bankruptcy. What’s more, debts tend to snowball with interest rates. This is especially true for those with bad credit scores, as your interest is already higher than average. It feels like a hole that just gets deeper and deeper, no matter what you do. However, there are plenty of resources for debt management. For example, debt consolidation loans are available. These transfer all your debts into one account and can help lower interest rates, too.
Finances are stressful and can lead you to feel trapped in debt. However, there are always plenty of ways to help yourself. Address the issue one step at a time and soon enough you will have a good credit score.