Credit scores are a complicated thing that we all have to deal with if you ever want to take a loan out. Whether it be for your student loans or an auto loan, your credit score will be important for lenders to decide whether you’re worth the risk of loaning to. But sometimes we make mistakes and we miss an important payment or even have collections come after us. Not to worry however, there are a multitude of ways for you to increase your credit score even after a collections disaster.

Improve Your Credit Score

We all know that your credit score is an important three number digit. It helps people decide whether they should lend you money or not. This is important for these businesses as they’ll know how likely you are to pay them back. But what if you have a lower than normal credit score? What then? Not to worry! We’ve put together a few ways to improve your credit score and get you back in good standing.

Pay on Time Or Earlier

Remember how your credit score is your record of paying your debts on time? This is where paying on time comes in. When you pay a bill or debt on time, this is reflected on your credit score as these lenders have to send in a report to the three major companies that handle credit score ratings. Namely Equifax, Experian and TransUnion

The more frequently you pay your bills on time, the higher your credit score will rise. A missed payment on the other hand will cause it to fall. However, you shouldn’t be too worried about a missed payment so long as you continue to pay on time after the mistake.

Keep Your Credit Balances and Utilization Low

Your credit balance is an important part of owning a credit card. It dictates how much you can lend before your run out of money to loan. The more you use a credit card, the higher your credit utilization becomes. The higher your credit utilization the lower your credit score drops if you miss a payment. Ideally, you’d want to use different credit cards or accounts to take a loan

Maxing out your balance on a single card is a terrible idea as it will reflect on your credit score and your lender’s perception of your ability to pay them back. Most lenders will prefer credit utilizations in the low thirty percent. This tells your lenders that you don’t use loans as often as those with lower credit scores and you know how to properly manage your loans.

Keep Old Reports, Even The Ones You Want To Forget

Old reports on your record should be something you should be happy for. FICO uses the age of your account as a starting point for an improved score. And one of the ways they can properly estimate how “old” your account is, is by using your older loans as the basis. This might be your student loan from your college days or an auto loan from your first car. Despite you wanting to forget and scrub out these older records, we highly recommend that you keep them there as a record of your ability to pay on time.

There is one big difference however, with bad debts where you miss the deadline, with good ones where you paid on time or even earlier. Bad debts have a deadline for when they disappear off your record for good, while good debts stay on your record for as long as you keep them there. Bad debts only stay on your account for seven years at most and after seven years of on time payments, you can expect that your record will be scrubbed clean. This is a great long term way to improve your credit score.

Request a Personal Credit Report

You’re allowed to have a single personal credit inquiry every year from each of three companies that manage credit scores. Make sure that you request a yearly credit report from all three of these companies.This credit inquiry doesn’t affect your credit score at all and actually helps you make decisions to improve your credit score. If you aren’t sure how to get your credit report, simply visit Annual Credit Report and request from there.

Your credit report has all the information that you need to know about your credit score and history. Review this report and make sure to find any discrepancies. If there are discrepancies in your account such as wrong information, make sure to dispute this with the offending company. These discrepancies can affect your credit score in the long run and it will become harder to dispute them as the years go by. Getting these discrepancies fixed can easily improve your credit score if the discrepancies were an error on the lender’s or issuing company’s end.

Sparingly Apply For New Credit

Remember that you aren’t the only one who can request a copy of your credit report. Some of these requests will either fall into one of two categories: soft or hard credit. We’ll be focusing on hard credit for now.

Whenever you apply for a new credit card, an auto loan, a student loan or any of the like, you will be requested by the lender to give them permission to submit a credit report from any of the three companies. This creates a hard inquiry on your account that can adversely affect your credit score if it is done multiple times. Just remember that these inquiries last for two years before they’re scrubbed off of your record.

Improved Credit Scores Don’t Happen Instantly

Remember that your credit score isn’t going to change overnight. It could take months or even years for you to see a noticeable change in your credit score. With many bad records lasting seven years and bankruptcy applications lasting up to ten long years, you have to remember that patience is a virtue when dealing with your credit score.

Many people suffer from bad credit scores that keep them from getting the loans they need. Are you one of them? If you are, then you might need some help raising those credit scores to more manageable levels. Contact us today to rebuild your credit scores!