6 Ways to Fix Bad Credit Fast
Most people lack the wealth to make huge purchases using cash. Examples include college tuition, new automobiles, and homes for sale. These and similar expenses are simply too expensive for the average person to pay outright.
The good news is that people can make big purchases without having the funds immediately available. It’s done through something called lending. Banks and other financial institutions lend you the money needed to make a big purchase, and you pay them back over time.
However, lenders don’t dispense loans out of kindness or generosity. They charge a fee for the privilege – referred to as interest – which is added to the principal sum. Moreover, they usually avoid lending money to people with poor financial histories. They do that – in part – by looking at the individual’s credit score.
If you have bad credit, you have limited financial options. Getting approved for loans, rental applications, and even certain types of employment is difficult. With this in mind, fixing bad credit as soon as possible is essential.
Unsure how? No worries. We have you covered. The following are six ways to fix bad credit fast:
Get a credit builder loan
The first step in fixing bad credit is establishing a positive credit history. This can be done by getting something known as a credit builder loan. Unlike traditional loans, credit builder loans have you make monthly payments first. Then, when you’ve made your last payment, the funds are deposited into your account. All the while, those on-time payments generate positive credit history. Simply put, credit builder loans take all the risk out of borrowing while providing all the credit-boosting benefits.
Dispute errors on your credit report
Have you looked at your credit report recently? Everyone in the United States is entitled to view their credit report for free, so take advantage of credit monitoring. In doing so, you may notice a negative entry that doesn’t add up to reality. You can file a dispute in order to have that negative credit history removed from your report. That helps boost your credit score significantly.
Pay your bills on time
It goes without saying, but we’re going to say it anyway: paying your bills on time is essential for having good credit. While one or two missed payments now and then probably won’t tank your score, you don’t want to take the risk. From your phone bill to your car note to your utility bills, it’s essential to pay by the due date in order for your credit score to go up instead of down.
Pay off credit card debt
According to Bankrate, the average American has a credit card balance north of $5000. Whether that harms their credit score comes down to the ratio between debt and available credit, commonly referred to as the credit utilization ratio. Generally speaking, those utilizing 30% of their available credit or less tend to have better credit scores. With this in mind, make a point to pay off those credit card bills as fast as possible, starting with those with the highest interest rate.
Request a credit limit increase
It sounds counterintuitive, but getting a credit limit increase is an effective way to boost your credit score fast. That’s because it instantly lowers your total credit utilization ratio. Unfortunately, being approved for a credit limit increase is difficult when you have bad credit. Typically, the only way someone with bad credit can get approved is if they’re able to prove an increase in their annual income. So if you’ve gotten a raise recently, consider this option as a way to improve your credit.
Start using a secured credit card
Secured credit cards are similar to credit builder loans in that they allow you to get credit-boosting benefits without the risk of getting in over your head. It works like this: you pay a cash deposit upfront as collateral and receive access to a line of credit of equal value. From there, the process is identical; assuming you make your payments on time, the deposit will be returned at the end while your credit benefits from the positive payment history.
Loans and lines of credit allow people to access things they would otherwise never be able to afford. These include higher education, motor vehicles, and residential real estate. But it ultimately depends on their credit score. With this in mind, doing what it takes to rise above bad credit is essential if you ever want to benefit from borrowing.