Do you have bad credit? Do you find your loan applications constantly disapproved by various banks, creditors and financial institutions? Would you like to boost your credit score? If so, pay close attention here.
Repairing your credit score and creating a sudden financial turnaround is impossible unless you pay back all of your debt. Even if you do pay back all of your debt, you will still have some things come up on your credit report for a period of time before it goes away.
What you have to realize is that there are no instant fixes to turnaround your credit score all of a sudden. But there are some things you can do to improve your credit score right away and increase it gradually as you pay back your debt with various creditors.
If you're seriously stuck with bad credit and need an urgent loan fast, don't despair. There are some creditors who may be willing to provide you a loan on a lower credit score. But before you apply for a loan with these creditors, it is important that you take a couple of steps to improve your credit core.
You see... every single loan that you apply for will have a negative impact on your credit score. It is called a hard inquiry because you are the party initiating it (by applying for the loan).
But when a bank offers you a pre-approved loan, it won’t have an impact on your credit score because the lender is using it for marketing purposes. This is called a soft inquiry.
So if you've already been denied a couple of loans, applying for another loan from another creditor is USELESS because there is little or no chance of your loan application being approved. The worst part is... if your loan application is disapproved, it is going to have an impact on your credit report.
Fortunately, there are some ways to turnaround your credit score. The exact turnaround you can make depends on your current financial situation.
With that said, here are some quick repair ideas to boost your credit score...
1. Get yourself added to the credit card of another person
If you have a spouse, family relative or a friend you trust who's had a credit card for at least 2 years and has never been late in payments and has had debt less than 20-30% on the card, ask them to add you to their credit card.
Adding you to the credit card doesn’t guarantee you another separate card that you can use to spend. You're just using their name to help you boost your credit score. They probably already have a good credit history which can be used to make a positive impact on your credit score. By adding you to their credit card, their score won't be affected negatively or positively. It just affects you.
But here's the thing – In the event that other person fails to make his payments on time, you will be responsible to make the payments.
2. Pay down 30% of your limit
Do not ever keep debt of more than 30% on any single credit card. Crossing over 30% of your credit limit has negative infractions on your credit. Most lenders never tell you this because they want you to buy and buy more and get into trouble. But this is the truth.
So make sure that you always keep your debt less than 30% of the limit on each of your credit cards. This is where multiple credit cards come in handy. Let's say you have a total debt of $2,300 and you have two credit cards with limits of $3,000 and $2,000. Instead of having all your $2,300 debt on the credit card with $3,000 limit, we recommend you to split it up.
Have $1300 on your credit card with $3,000 as limit and $900 on the credit card whose limit is $2,000. You can accomplish this through balance transfer. Credit companies will always offer balance transfer options - use it to your advantage.
3. Do NOT close your credit card accounts
If you're currently paying off one debt after another, make sure that you do not close you credit card accounts. It is natural tendency to want to immediately close all of your credit cards because of the frustrations the debt gave you.
But doing so will have a worse impact on your credit score than you can imagine. When you close a credit card, all of the positive or negative score that the specific card was contributing to your credit vanishes immediately.
Negative infractions will still remain until a stipulated period of time passes. But none of the positives will show up on your credit score anymore. It cannot contribute to your FICO score. So stop closing your credit card accounts. Pay back the debt and keep them and use it for MINOR expenses only. Minor expenses could be something like your groceries, fuel, electricity bill, etc.
4. Get secure credit cards
One of the fastest ways to improve your credit score and create a turnaround is with a credit card. A credit card massively contributes towards your credit score. If you've closed out all your credit cards and have zero credit cards with your right now and do not qualify for a card anymore, your best bet is with a secure credit card. A secure card is a card that is offered against some form of collateral. In most cases, this is a fixed deposit.
Get the secured card and make purchases on your essential expenses on a monthly basis. Always pay back your bills every single month without fail and pay in full.
Do not make a minimum payment (as it'll get you even more in debt). Make the full payment at the end of each month and only use the credit card to buy things that you can afford.
5. Pay back the IRS debt
Lastly, make sure that you pay back all of the debt that you owe to the IRS even if it's just twenty dollars. This is by far the most important thing you need to do. Debt to the IRS will have the worst impact on your credit score. Things such as Tax liens can have a horrible impact on your borrowing abilities.
Calculate all of your taxes and pay back the IRS debt in full. Try to negotiate a settlement with the IRS for a specific amount you can afford. Do not try to negotiate a monthly payment plan (this can impact your credit and you'll be in more debt because of the interest). If you have to borrow from your credit card, borrow and pay it back to the IRS at all costs.
I hope that these tips help you in your journey to credit repair (and boosting your score). I urge you to pull your free credit report (AnnualCreditReport.com) and even monitor your credit profile constantly so that you are aware of everything going on with your credit.