- Personal Finance
3 Steps To Improve your Credit Now
One of the best and easiest things a person can do to improve their financial situation is to improve their credit score. Even if the situation is dire and you are contemplating bankruptcy there are solutions.
Whether you are looking to buy a new house or car having a good credit score can make the difference between affording your life or living paycheck to paycheck. Let me give you an example: Tom and Byron are both going to buy a new car; Tom has a credit score of 810 while Byron has a score of 600. Tom buys a late model Mercedes CLK and his payments are $320 a month.
Byron buys a late model Hyundai Elantra and his payments are $510 a month! The Mercedes is of course more expensive than the Elantra but because Byron has a bad credit score and credit history his loan interest is 19% while Tom’s loan interest is 2.9%. What a difference a few percentage points can make!
So even if they have the same income Tom can afford to pay for his expensive car while Byron will struggle to pay for his cheap car. So what 3 things can Byron do to improve his credit score now?
3 Ways To Improve Your Credit Now
Spread your credit risk around; that is if you are maxed out on one card but you have zero dollars on another then put half on the empty card. Why?
Because lenders like to see a good debt ratio meaning that the further away from you credit limit that you are the better risk it is for them to lend you money and it improves your credit score dramatically when you only use 10% to 30% of the credit you have available.
Call the credit card companies and or collection agencies and work out a payment plan or renegotiate your terms. What most people don’t realize is that credit card companies would rather accept some of your payment than none at all.
Most of the companies will work out a plan and even report favorably to the credit reporting agencies once everything is worked but the key is: YOU MUST CALL.
Now this step is questionable but it will add up to 100 points to your score, you can add accounts with perfect payment history to your credit file.
There are two ways to this: you can ask a friend or family member with accounts in good standing to add you to their account and benefit from their credit score or you can pay a company that does this for a fee (You can find these companies by doing a google search).
This last step will definitely improve your score drastically and in addition to the other two steps can add at least 170 points to your score. What does this mean? You can take your score from 656 to 781 which is world of difference in a credit report.