If you are looking to repair your credit, you are not alone. Having poor credit is one of the hardest things that a person could ever face in life. According to a study done by Scoresense, more than half of all Americans have been rejected for various credit products due to poor credit. While it is possible for you to live life with poor credit, the negative affects on your finances will not make it pleasant.
You will not be able to buy a house, your ability to own a car will be stifled and any other big-ticket items will be impossible to obtain. If you’ve come across any Lexington Law Firm reviews online, you’ll likely see the same advice.
Paying Your Bills on a Credit Card
One of the quickest ways for you to repair your credit is to pay all of your bills on a secured credit card. By using your secured credit card to pay off all of your bills, you are showing the credit companies that you are responsible with the money that you are given.
The great thing about using credit cards to pay off your day-to-day debt, is that you can very easily pay it off. Think about it. Right now, you are most likely paying your fixed expenses via your checking account. If you were to charge those expenses to an unsecured credit card, you could help build your credit. You would essentially be paying pretty much the same amount with a tiny fraction of interest added on. Not a bad way to quickly build your credit.
The reason that using secured cards to pay all of your debts is such a viable way to increase your credit score is because you are showing the creditors you can pay off large sums of money quickly. Just think. Your monthly bills are probably in the thousands give or take. With you paying that off each month on time, you are signaling to creditors that you can easily pay off most of your debt.
Applying For A Personal Loan
You may think taking out debt to help boost your credit wouldn’t make much sense, but you would be wrong. Just as long as you use the loan properly. When it comes to your credit score, there are five categories that play into your overall score. Each category carries a different weight. They are as follows: payment history (35%), length of credit history (15%), credit utilization (30%), and credit mix (10% each). To give you a better idea as to how a personal loan can help repair your credit, here are some ways:
- It will help reduce your credit utilization ratio: When you take out a personal loan to pay off your credit card balances, you wind up with greater unused credit. This is because personal loans are not included when factoring the ratio. Therefore lowering your overall credit utilization ratio.
- Your credit mix will be diversified: Having a mix of different credit types (i.e. credit cards, loans etc) and handling them responsibly, helps show lenders you can handle the responsibility of juggling a variety of credit products.
- Your timely payments get reported to the credit bureaus: When you ensure that you make your monthly payments on time for your personal loan, the positive activity is reported to the three major credit bureaus.
Keep in mind, when you first apply for a personal loan, a hard inquiry will be made on your credit. This will temporarily knock a few points off your credit score but the positive impact of paying off your personal loan outweighs this little ding to your credit.
Repair your credit asap
Having good credit is essential to being financially healthy. When your credit is poor, so many aspects of your life are negatively impacted. Everything from high interest rates to being unable to rent an apartment, even getting a job can be impacted.