improve your credit score

What to Do If You Have Credit Issues?

Credit issues can impact just about every aspect of your life. Why? If you do not have a good credit score, it is harder to qualify for mortgage loans, auto loans and other types of financing. In addition, a bad credit score can result in higher insurance premiums, and you may not be able to secure certain types of employment.

Fortunately, there are effective ways to deal with credit issues. Since you didn’t get into this situation in one day, you can’t repair your credit overnight. Therefore, you should not expect a better credit score after only a few days or weeks. Even so, if you take the necessary steps to get your personal finances on track, your credit score will gradually improve and you’ll be a step closer to achieving A+ credit.

Credit_Card1. Check your credit report each year

Many consumers do not check their credit reports on an annual basis. Your credit report provides a detailed account of your credit history. It includes your most recent accounts, balances, older accounts, as well as your account statuses.

When you apply for new credit, creditors review your credit report to see if you qualify for financing. But unfortunately, your credit report may not be accurate. A creditor may report information in error, or someone may steal your personal information and open accounts in your name.

Checking your credit report regularly is the best way to identify mistakes early and each consumer is entitled to one free report from each of the bureaus every 12 months.

2. Seek professional help

If you notice errors on your credit report, you can notify the reporting creditor to clear up any mistakes. In many instances, this is all it takes to improve the accuracy of your report. But sometimes, repairing serious credit report errors requires professional help.

Credit repair agencies have experience fixing mistakes on consumer credit reports. They’ll investigate a claim and work with your creditors to remove any information that’s inaccurate. Negative information on your reports can drop your credit score by several points. However, once this information is deleted from your report, your credit score will improve.

3. Understand how credit works

If you do not understand how credit works, you may not make wise credit decisions. Several factors influence your credit score, such as your payment history, the amounts you owe, the length of your credit history, the types of credit, and new accounts.

Since your payment history and the amounts you owe make up 35% and 30% of your credit score, respectively, it is important that you pay creditors on time and maintain low balances.

This is much easier to say than do. However, if you only charge what you can afford to pay, and if you pay your balances in full each month, you can improve a low credit score.

4. Get rid of your credit cards

Canceling a credit card may reduce the length of your credit history, thus lowering your credit score. Rather than get rid of credit cards, destroy your cards and only use cash. The less you use a credit card for purchases, the less debt you’ll accumulate.

In addition, do not splurge when applying for a loan. Oftentimes, consumers overspend when buying a house or car. As a result, a larger percentage of their income goes toward paying off these debts. They end up living paycheck to paycheck; and if unable to make ends meet, they might rely on a credit card. This complicates a financial situation. Therefore, know your limitations and be reasonable.

5. Establish new payment terms with your creditors

Defaulting on a credit card or loan, and then ignoring your creditors will not make the debt go away. The credit card company or bank may send your account to collections or seek a judgment. Both moves can damage your credit score, and this negative activity can stay on your report for up to seven years.

To avoid any collection accounts or legal action, always communicate with your creditors. Explain your situation and ask the creditor for a new payment arrangement. Based on your economic situation, the creditor may lower your monthly payment to an affordable amount, or temporarily suspend payments until your finances improve.

Realizing that you have credit issues might keep you awake at night. However, credit problems are not permanent. There are ways to rise above a low credit score. However, you need to be proactive and make wise credit decisions.

 


5 Reasons Credit Cards Make Financial Sense

It’s easy to vilify credit cards as a means of racking up huge amounts of debt. Whilst it’s definitely true that UK consumers are often heavily indebted to their cards, they can still be useful tools to protect your finances and manage cash flow:

They Protect Your Cash

Fraudulent transactions and identity theft are rampant in this electronic age. Using a credit card to make online transactions makes a lot of financial sense: If the website is fraudulent, or your details are stolen and used to make a transaction, you’ll almost certainly be covered for anything coming out of your account. The same thing isn’t true with a bank debit card, and certainly not any kind of money order or cash payment.

Likewise, if a company goes bankrupt before you’ve received your goods, you should be covered. As long as you quickly pay off the purchase, it makes sense to use a credit card for most online and distance purchases.

iStock_000004652423Small-280x0They’re Convenient

So long as your credit card is part of a sound financial plan, and you’ve budgeted properly, it makes sense to use it instead of carrying vast amounts of cash. If you’re faced with an ATM outage, a credit card might well be the only way of paying for goods and services. It makes sense to have one for backup if nothing else.

They’re Great For The Traveller

These days, credit cards are the number one way of carrying money to overseas destinations. The same reasons that make credit cards a safe way to pay for goods and services at home make even more sense on holiday where you can’t always be sure about the security of an ATM or the honesty of a shop owner. Credit cards also mean that you don’t have to worry about carrying vast sums of foreign currency with you either. The exchange rate is often more favourable than an exchange service at home.

They’re Good For Your Credit Rating

If you have a credit card, or even several, and always pay them back on time, it can be a good way of demonstrating your financial stability. Often, a lending company is more willing to give a loan or mortgage to an individual that has a credit history but makes timely repayments, than one with no credit history at all. Lenders keep detailed records about your credit limit as well as what you’ve repaid and when, so a clean credit card history is a great way of improving your score. Remember though: despite what you might have read in a credit cleaner review, it’s very difficult, if not impossible to remove a bad credit record, so make sure you make prompt repayments

They Come With Some Useful Extras

Credit cards often come with a useful interest free period on both balance transfers and purchases, so they can be used as an effective way of managing debt, as long as that’s part of a properly planned budget. In addition, many cards often come with some enticing bonus offers that give you things like air miles, money off vouchers and even entrance into the business class lounges of airports. Shop around, and you could save a substantial amount of money just by using your card.

Proceed With Caution

Credit cards can be a great way to not only manage your finances, but also to protect them. Just make sure your credit card use is part of a sound financial budget.

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By Harry Price

Harry Price returned to his love for writing after leaving his job as an interior designer. He is enjoying his new entrepreneur life and the freedom it gives for him to travel and move around the world.


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