There are many people who are victims of the prevailing poor economy of the country and have been facing hassles when making credit card and debit payments. Due to late payments, their credit automatically takes a hit, thereby lowering down the score from good to bad.
Guide towards improving the credit score
Having bad credit score may make the person feel to miss out on significant opportunities in life. Be it to get a student loan, applying for a new credit card or job or purchasing a home; bad credit might hamper the goals and objectives of the individual. However, there are several things which can be done for improving the credit score and to once again win favors and low-interest loans from traditional banks and financial institutions.
Assessing the situation
Ignoring debt problems and tossing away the bills may seem easy. However, the initial significant step to be taken to become financially responsible is to face the facts. It is useful to get a personal credit report from the major agencies and compare them to check for any kind errors or discrepancies.
Getting to know Credit Utilization ratio
After identifying open credit lines, the next step is to have the credit utilization ratio to be determined on every card. The prevailing credit card balance is to be taken and divided by credit limit. Then this number is to be multiplied by 100, in case, the card with a limit of $10,000 has due of $1,000, then 10% is the credit utilization ratio.
Negative impacts may be noticed on the credit score due to higher credit utilization ratios. The objective needs to be 25% and underutilization.
Applying for a secured credit card
At times, mistakes committed previously may create obstacles when trying to create a positive credit history using regular credit cards. Hence, a secured type of credit card can be availed in this situation. With this card, an amount can be deposited up front to the lender in the form of collateral, and the care used for making on-time payments and to improve the credit score.
Establishing diverse credit
Once, the person has learned to manage his finances responsibly and has done his best to improve the credit score; the next step would be to have the credit accounts to be diversified. Switching over to credit cards for bad credit unsecured can be a great idea. By availing credit cards for bad credit unsecured, the person can demonstrate his capability to have different credit types managed, which can have a positive effect on his credit score.
What one has to understand is that trying to rebuild the credit does take a good amount of time, sincerity to resolve the impending issue and lots of dedication. Credit reports may even go back to about 7 years. Hence, it might take a very long time for significant improvements to be noticed in the credit score.
It is by requesting n the credit reports immediately and following the above-mentioned steps can help the person to fulfill his dreams and objectives in life and to stop from having bad credits.