When it comes to your credit, it’s no secret that the stronger your credit is, the more doors will open for you.
When you have a high credit score, you find yourself tempted with a lot more offers for auto loans, credit cards and sometimes even mortgage offers because the lender finds you to be a good potential source of business. Likewise, if you have bad credit or even weak credit, you’ll find yourself having a much harder time qualifying for even small, and you might get discouraged easily.
Don’t get discouraged. Start small and begin improving that bad credit score.
It’s time to start working on improving that bad credit score so that you can get those personal loans, credit cards, and mortgages when you need them. For starters, you need to sit down and create a financial plan. It’s time to start paying down some of your debt. Look at your credit cards, loans, and your debt level. Which areas have the highest interest rates? Try to pay off loans with higher interest rates quicker. Then look at which areas have the most debt. Is it your credit card? Your auto loan? Or maybe you’re mortgage. You’re going to want to see what bills you can pay off the quickest. Maybe look at a debt consolidation loan to make that debt a one payment debt.
Don’t take it personally. There are ways to boost your credit score.
Improving your credit doesn't happen overnight, but it can take as little as six months to do. Here at Tropical Financial, we offer a free financial check-up to all our members. This credit check process allows you to sit with a financial specialist and see what might be holding the numbers down. It allows you to make a plan of action and to see what you can do to improve your score before you’re ready to submit your next loan application. We all have that same fear of being denied when applying for a loan, so it’s best to be proactive and boost the numbers before you take the time to fill out that application.
Tips to remember when working to improve your credit.
When looking to improve your credit score, start with your payment history. Be sure that you are making your payments on time, even if it’s just the minimum amount due since 35% of your credit score is made up of your payment history.
Next look at your much you owe, 30% of your credit score is composed of how much debt you have, so it’s important to start paying down that debt quickly.
15% of your credit score consists of your length of credit, this is an area that you can’t control too much as everyone has to start somewhere with credit, but the longer you’ve had it the higher you will rank in that area.
Finally, 10% of your credit score is based on the mix of credit you have as well as the available credit to you. Look at how many types of credit you have. Do you have an auto loan, several personal loans, maybe a mortgage and tons of credit cards? This will affect 10% of your credit score. And while it might not seem like a lot, it’s important that you keep this in the back of your mind as opening tons of new credit cards just to do that 20% discount on the spot might not really be saving you too much.
Remember that downsiziing your credit will also help boost your credit score. For more information on how to manage your debt and increase your credit score, download TFCU's free Downsizing Your Debt Guide.