Everyone (okay, not really) stresses over their credit score and the way it affects their access to credit. When you have a bad credit score, it means that you may not be able to service your loan obligations. This makes lenders more suspicious of your ability to pay. Also, new lenders will be hesitant to give you loans on your credit cards. Worse, when you are given the credit facilities, you will still have to pay higher interest rates as you are considered as a high-risk client. Of course, it is understandable that there are things and events that may happen in your life and damage your ability to service loans on time. These things may range from a sudden sickness (that will affect your income if you depend on gig economy), job loss or time spent while searching for a job.
Good thing is that you can manage your credit balances and responsibilities to keep a high score. The following tips will help you manage your credit (either maintain a high score or get yourself from th blues) to ensure that you can get quick approvals, pay lower interest rates and enjoy financial freedom.
Do away with small credit card balances
This is a sure way of moving out the blues and making sure that your credit score improves. However, eliminating your credit card balances goes beyond paying up your balances. It involves reducing the number of cards that have balances because having balances on many cards says something about your appetite for credit and the fear that you may not be able to meet your credit obligations consistently.
A good illustration would be someone with 5 cards that have accumulations of small balances, say, £50 to £100. Doing away with these balances will improve your credit score because it will reduce the chances that you will forget to pay up balances that are due. Paying up all the small balances will go a long way to giving you a strong credit score in the medium and long term.
Set up reminders for your payments
One of the strongest determinants of your credit score is missed payments as it raises doubts on your commitment to paying up balances or your ability. This is connected with the first tip, as having many cards with small balances may increase the chance that you will forget to submit your payments on time. Therefore, having reminders in your phone will help you plan to pay when the credit balances are due as well as re-negotiate terms of payment when balances fall due at a time when you are not in a position to pay.
Another approach that will ensure that you are paying your balances in time is the use of automatic debits from your account. This will reduce the risk of missing payments as well as encourage you to do proper budgeting at the start of a given payment period. Also, it will save you the trouble of keeping up with reminders that can become a nuisance.
Take a frequent look at your credit score
Say you are looking forward to taking a credit facility in the foreseeable future and you want to get a cheap interest as well as a manageable repayment period that allows you enough flexibility. The best way to anticipate a good credit score is to make it, by adjusting your spending behaviors to show a commitment to your credit responsibilities. The good thing with formulas that are used to calculate a credit score is that they will always capture good spending habits and increase the confidence that lenders will have on your ability and dedication to pay.
Keeping a close watch on your credit score can also help you locate a wrong entry, like a payment that is marked as late while it was paid on time. You can follow up and ensure that the information is rectified or wrong entries removed from your records.
Manage your debt burden
Debts come at different costs depending on terms of repayment and other factors considered when you were being issued with the facility. Also, credit cards come with a cost and it means that spending money off the pocket is a cheaper way to spend as compared to having credit cards.
Reducing the use of credit cards, therefore, is a credible way of reducing your dependence on debt. This should be followed by a reduction of total debt, starting with the most expensive facilities going to the cheap ones. The idea is to reduce the amounts of money you pay as interest by paying up cheap loans in the shortest time possible. Using this tip will not only strengthen your credit score but also give you a much-needed financial freedom that will have a direct impact on your wellbeing.