3 Tips to Boost Your Credit Score

Everyone wants a good credit score because it makes it easy to get low-interest loans. Plus, more and more employers are using credit scores to help determine who they should and shouldn't hire. If you would like to know more about how to boost your credit score, check out these three tips.

1. Build Good Credit With Loans

If you have little to no credit history or a low credit score, getting a loan can be difficult, but they are necessary to help boot your credit score. As long as you make payments on time and repay the loan on time, it drastically increase your credit score. For this reason, you may need to try alternatives to traditional loans.

One option is to choose a short-term loan, which often need no collateral or good credit. As an added benefit, these loans are small, so you won't overwhelm yourself with huge amounts of debt. You may have to make more frequent payments, but that helps repay the loan faster.

Another option if you have little or bad credit is a credit-builder loan. Making even one on-time payment with a credit-builder loan can help improve your credit profile. When taking out loans to boost your credit score, make sure you don't bite off more than you can chew as missed and late payments will only help to destroy your credit score.

2. Keep Credit Card Balances Low

Having credit cards can also help your credit score, but not if you have a ton of maxed-out credit cards. Racking up too much credit card debt makes you a higher risk to lenders. If you keep a low balance on your credit cards or frequently pay them off immediately, your credit score will thrive.

Don't go nuts and apply for too many credit cards. Even if you barely use them, having too many credit cards may also negatively impact your credit score, making it harder to get loans in the future. It's better to choose a few credit cards and keep them open for a long time. Jumping around from credit card to credit card won't appeal to lenders.

You also want to make sure you always pay the payments on time, and try to pay more than the minimum amount. Luckily, most credit card companies will not report the late payments to credit bureaus until the payment is about a month late.

3. Catch Up on Late Payments

If you are behind on any debt, you need to catch up to boost your credit score, and there are many ways to do this. One method is to contact the lender directly and talk about changing your repayment plan. The lender will be happier to make a few adjustments (so they can actually get repaid), especially if they know the alternative is you filing for bankruptcy, which means they get nothing or only a portion of the overall debt.

Another method commonly used is the snowball method. With this method, you simply list all your debt from smallest to largest. Then, you throw as much money at the smallest debt, while only paying the minimum on other debts. Once the smallest debt is paid off, you move to the next debt.

Finally, if you have a lot of small debt with high interest rates, it may be better to consolidate the debt into one loan. Even if you have to have a high interest rate, combining all the rates and bills into one should reduce how much you have to pay overall.

Many Americans suffer from a low credit score, but there are many ways you can boost yours. One way is with a small loan that can easily and quickly be repaid. If you would like to know more about small loans, contact us at Central Finance today.