A lot of us have trouble maintaining good credit; especially if you suffered a hit recently, it can be very difficult to recover, and you have to actively work at improving your credit score. Did you know you can significantly reduce the amount of time necessary for that? It's true, you can bring your score to a decent level quicker, as long as you know the right tips and tricks and the correct way to apply them. Keep reading to find out the best ways to rebuilt credit in 2018!
What Impacts Your Credit?
Let's start with explaining how your credit score works. Your score is a number that results from your financial behavior - treat your finances responsibly, and your score will grow. Treat them carelessly, and that number will fall. Basically, your score reflects how responsible and dependable you are as a borrower. It will come in handy - or be an obstacle - when you try to borrow money, buy a house, or rent an apartment.
Your credit is impacted positively or negatively by every financial move you make, good or bad, from letting bills go unpaid to being diligent about paying back your loans. Experian can give you a great explanation on how it works, and you can also check your credit with them.
1. Pay off debt
You have to take things in order, and the most egregious of problems is your debt. Unpaid debt is a huge burden on your credit score, and it drags it down more than you realise. Especially if it's gone to collections, it doesn't reflect kindly upon you.
That's why, before anything else, you need to start chipping away at that debt you've got. Make it a priority and aggressively repay, as much as you can, and as quickly as you can. If you make a schedule for the next year and tighten your belt a bit, you should be able to successfully improve your score by reducing your debt. The Money Advice Service has great information on prioritising debt.
2. Pay your bills on time
Bills can actually be pretty significant, as well. If you stop paying your cellphone bill every time your provider pisses you off, that will certainly be reflected on your credit score, and you won't be happy about it.
If you tend to forget to pay them, then take active steps to help you remember: make a note in your calendar, set an alarm on your phone, or, best of all, set up a direct debit. That way, the payment is made automatically, on time, and you never have to lift a finger. Just make sure you have enough money in your account.
3. Don't borrow more than you can repay
If you do find yourself in need of borrowing money over this period of time, then be very careful about it and make sure to pick intelligently. First of all, don't borrow money with high interest, because that makes it difficult and expensive to repay.
Second of all, don't ever borrow money you know you can't afford to repay. That pushes you deeper into debt and it greatly affects your credit score. It's not worth the negative ramifications. Check out Money Saving Expert for a loan eligibility calculator to see what kind of loan you can actually get.
4. Use personal loans to your advantage
A trick a lot of people don't realise is that you can actually use debt to your advantage, but only if you control it. An out of control credit card debt is obviously detrimental to your credit, but if you make smart use of a personal loan, you may be able to quickly and steadily increase your score.
You see, since a credit score is a mere reflection of your ability to afford and repay debt, getting an affordable loan that you know for sure you can repay reliably and on time will look very good and positively impact your score. You can demonstrate financial responsibility and that you are a reliable borrower.
Remember the tip about the interest rate - if at all possible, opt for a secured loan in order to make it easy on yourself; the interest rate is much lower on secured loans.
In conclusion, there are several ways to rebuild your credit and improve your score. You just have to make a conscious effort to pull up your score, and for that, you may need an incentive, like an imminent mortgage. Just make sure to do it carefully and stick to your goal.