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Five Ways to Improve Your Credit Score to Get a Debt Consolidation Loan

Five Ways to Improve Your Credit Score to Get a Debt Consolidation Loan

Are you struggling with a low credit score? If yes, you are in a much better position to make gains much quicker than an individual with good credit history. The lower a person’s credit score, the more likely they are t  reach a 100-point increase. This is simply down to the fact that small changes can result in a higher increase in scores. Below mentioned are some of the strategies to improve your credit score to get a debt consolidation loan:

Making your payments on time

Even though this is obvious, late payments can significantly affect one’s credit score as this piece of information appears on their credit report, and are usually responsible for a dip in their scores. When it comes to credit cards and loan payments, it is important to at least pay the minimum amount on time. If you happen to miss out or skip payments, it will have a disastrous impact on your credit score. By consolidating all your high-interest debt into one easy-to-make loan payment, you can decide how much you wish to pay back each month. This allows you to take control of your money and make sound financial decisions. Paying the bare minimum on your credit cards alone will keep the accounts from being late. This strategy will keep you from eventually paying off your debt completely. One of the most common mistakes that people make is having their accounts go to collections. This means that you have chosen to not pay your scheduled monthly payments or have skipped payments for a couple of months and the account gets turned over to a collection agency. Irrespective of you making the payments ultimately, your credit score will be negatively impacted for up to seven years.

Ensuring your accounts from going into collections is a fairly straightforward process. If you can’t afford to make the entire due amount, get in touch with the creditor and negotiate an alternative payment schedule or as mentioned earlier consolidate all your debt into one manageable payment. People who usually land in financial trouble usually tend to ignore these issues until it becomes major legal problem. Taking a responsible approach and working with your creditors to make timely payments can keep your account from going into collections. Over time, it will protect your credit score and save you a lot of money.

Top Ensure you maintain a low credit card balance

The fact that you maintain a lot of credit cards alone impacts your credit score. Furthermore, your payment history on those accounts also dampens your score. Another factor to take into consideration is having an account balance that is 35% or more of your available credit limit which will hurt your score even if you make your payments on time. If your credit limit is $1000, you would ideally need to maintain a minimum balance of $350 and make timely monthly payments. Your credit history should show that you are making a conscious effort to reduce your debt, while properly using your credit cards. Based on your situation, it will make a lot of sense to spread your credit card debt over four to five cards, while ensuring that the balance on each of them is below 35% of the total limit. If you practice this and make timely payments, it will give your credit score a boost. But before you adopt the above-mentioned strategy, you must calculate the interest you will be paying and compare the interest rate between the other cards. In a few cases, you can save money by consolidating your credit card debt onto one low-interest card. Take a decision that is best for you and your finances.

Avoid closing unused accounts and maintain a good credit history

A factor to consider when calculating your credit score is the history you have with each creditor. If you maintain a positive relationship with each creditor, you will be rewarded even if your account hasn’t been used in a long time. The longer your positive history is with each creditor, the better.

Shop for the best rates on credit cards and loans and apply when needed

If you’re looking to make a big-money purchase, it is common for customers to walk to retailers and ask for a discount and get a good deal for large purchases. If you open a credit card account with the retailer, make sure to read the fine print. Identify what your interest will be and what fees come with the card. Only apply for credit if you need it. If you’re applying for a retail store credit card if you’re going to use it once or twice is not a sound financial decision, and it can be detrimental to your credit score. Don’t apply for credit if you don’t need it.

Check your credit report regularly for any inaccuracies, and avoid excess inquiries

One of the simplest and quickest ways to boost your credit score is to carefully go through your credit report and correct any errors or outdated information present. If you find any inaccurate information, you can get it removed within ten to thirty days. Every time you apply for a loan or a credit card, a potential creditor will inquire with one or more credit reporting agencies. Please note, that this information will be added to your report. If you have made multiple inquiries in a short period, it will significantly reduce your credit score.

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