In your younger years, you probably thought buying a house or car was just about having the money. If you promised you’d eventually pay the bill, you could buy what you wanted. Little did you know that a three-digit number could have such an impact on your financial flexibility. Had you known, you may have paid more attention to your credit score.
Maybe you’ve played fast and loose with your rent or student loan due dates. Perhaps you’ve even missed a few payments. In that case, your credit score could feel like an anchor now.
Don’t worry — you can fix it. Getting close to the holy grail score of 850 will take some hard work and patience. It’s possible, though. Follow these six tips to getting yourself back on sound financial footing.
1. Get a Secured Credit Card
The way credit cards get demonized, you may not know they can play a big role in raising your credit score. Credit cards allow you to show the credit bureaus you can use credit responsibly and pay your bills on time. So just sign up for one, and your credit woes will soon be a thing of the past, right? Not so fast. A lackluster credit score will make you a liability in the card issuer’s eyes, and it’s likely to pass on approving your card.
Don’t stress, though — just because the credit card company tells you no doesn’t mean you’re doomed to only carry cash for life. A secured credit card could be the answer you’re looking for. Because such cards are backed by an initial deposit or funds transfer from you, they are much easier to qualify for. You can use a secured card just as you would a traditional credit card. If you spend wisely and remember to make your payments on time, your credit score will start to recover.
2. Watch Those Due Dates
Speaking of on-time payments, be sure you’re paying attention to when your bills are due. To facilitate this, you can create a cycle where they’re all due on the 1st or 15th of the month. When you get busy, though, it’s still easy to let a “pay by” date pass you right by. If you make a habit of late payments, though, your credit score takes the hit. That means it’s time for automated reminders.
If you have a smartphone, there’s a good chance you’re already using the calendar feature. Make that schedule-in-your-pocket work for you. Set up bill payment alerts that pop up a day or two before your bills are due. This way, your payments will be on time, and you’ll bypass any late fees. It’s a credit score win-win!
3. Minimize Your Credit Pulls
Credit cards may be important to establishing a good score, but that doesn’t mean you should apply for them all. Each time you do, the bank or card issuer pulls your existing score to see whether it’s good enough for approval. The ironic thing is that some pulls can lower your score all on their own. So-called soft inquiries, like those for some secured cards, don’t impact you. Hard inquiries, like ones for traditional credit cards, can knock a couple of points off.
Banks will also be suspicious if you have too many pulls. If you’re filling out bunches of applications, you could look like you’re in a pinch for money. That makes banks nervous. If they think you’re a liability, you’ll be denied and lose some credit points. So sidestep this problem by being choosy with your applications.
4. Say Yes to Store Credit
While you should continue being selective with your credit applications, consider adding in some store credit cards. You’ll have plenty of chances to do so. Nearly every clothing or specialty store offers its own card. Next time a cashier asks if you want to apply, don’t automatically say no.
The reason is that getting approved for a store credit card is much easier than earning bank approval. Plus, the spending limit is usually lower, making it harder to rack up lots of debt. Be aware these cards typically have higher interest rates, though, so try to clear the balance every month. Otherwise, you’ll be looking at added interest charges.
5. Optimize a Short Credit History
The length of your credit history contributes heavily to your credit score. If you’ve had less time to develop a track record of on-time payments, you’re at a disadvantage. Luckily, that’s not the end of the world. As long as you’ve kept up with due dates, even a short credit history can be a benefit.
Use a financial activity tracker to showcase your good performance to the credit bureaus. Free options like Experian Boost will report your history of payments to utility companies and streaming services. Do you rent an apartment? Paid services like RentTrack can spotlight your dependable payments to your landlord. If you use online bill pay, UltraFICO can help boost your score as well.
6. Ask to Become an Authorized User
A credit score is an individual thing. Getting some assistance to rebuild yours can be a smart move. This is where your family or good friends can help. Ask whether they’re willing to make you an authorized user on their credit card. If so, you’ll be able to make purchases, but they’re on the hook for payments. Needless to say, this arrangement requires a fair amount of trust between parties.
In fact, you’ll need to trust the cardholder as much as they’re trusting you. Any credit boost you’ll receive from this tactic depends on your loved one making consistent, on-time payments. If they do, your credit score will climb over time thanks to their responsible financial behavior.
It only takes a few missed payments to tank your credit score. Helping it heal requires some time and persistence. But if you use these six tactics, your credit score will begin to rebound. The increased financial freedom you’ll feel will be worth it.