One of the best ways to deal with mounting debt is to consolidate it by taking out a personal loan at a lower interest rate than your credit cards. The problem is that to get a personal loan – or any other loan for that matter – you have to have a credit score that lenders won’t be scared off.
The good news is that there are ways to increase your score immediately without paying off your debt. From there, you can get the loan you need to start eliminating your high-interest debt once and for all — or take advantage of the many other doors that open when you have good credit. There’s no reason to pay more for loans, so follow these tips to improve your credit score and help yourself.
Review your credit report regularly
When it comes to increasing your credit score, the first step is also the easiest: Keep a close eye on your credit.
One of the best ways to monitor your credit is with Chase Credit Journey. Chase Credit Journey is an online credit monitoring service for Chase account holders and people who do not do business with Chase. Your credit score is provided on a weekly basis, but you can check your score whenever you want using the app or the website. It offers identity monitoring and restoration, customer support, and educational tools to help you build your credit by better understanding what goes into your credit score.
Best of all, Chase Credit Journey is completely free, whether you’re a Chase customer or not.
In 2019, a white paper from the Credit Builders Alliance (CBA) showed the score-enhancing power of a little-known tactic called the rent report. Not all credit scoring models consider one-time rent payments in their calculations, but all three bureaus will include rent payments in their profiles and reports if they receive them — but that’s a big if.
The ABC paper showed that many people with low credit scores are tenants who would benefit the most from getting their housing payment history on time before lenders. About four in five people saw their score improve when landlords reported their rent payments, with the average score increasing by 23 points.
Some building owners and managers report rent payments, but many do not. If you want, you can pay for a service like RentReporters, which claims their average user gets a 40 point boost in 10 days. Many services like RentReporters also ask bureaus to report your utility payments on time, which can boost your score, just like housing payments.
Request a credit limit increase on your current cards
If you’ve had a card for a few months or more that you use fairly regularly and you’ve made all your payments on time, it’s very likely that your lender will increase your credit limit if you ask them to. It’s a great decision because it doesn’t require a credit check or application, there are no fees, and if you’re approved, you’ll increase your open credit and lower your credit utilization rate.
This very important ratio is the amount of open credit you use, which is 30% of your FICO score, right after your payment history.
The best way to increase your open credit and increase your score is to pay off as much of your existing credit card debt as possible. If you repay enough, you may see an increase in your score almost immediately while eliminating revolving debt from your financial life. Of course, this option requires money that is simply not in many family budgets, but there is another way.
When it comes to your credit utilization rate, lower is better, but 30% is the magic number in the industry. If you’re struggling with debt, another line of credit may seem like the last thing you need, but if opening another credit card drops your utilization rate below 30%, it might be worth it. This is especially true if you open a balance transfer card that lets you park high-interest debt free of a 0% introductory APR for a year or more.
This is more of a preventative measure than a score improvement strategy, but the best thing you can do for your score is to avoid missing payments for any reason. By the time you do, none of your other efforts will matter – or at least they won’t matter as much. Your payment history makes up 35% of your total profile – more than a third of your overall score – which is more than any other factor in your financial life.
A missed payment can be poison for lenders, and the longer you remain in arrears, the greater the negative impact on your report and score.
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