A person increasing their credit score

Improving Your Credit Score in a Bad Economy

Your credit score is a number that has a huge impact on your life. If you want to have a good financial future, you need to have a good credit score. A high score can be touch to achieve however, especially if you have had issues in the past. Even in a bad economy, it is possible to increase your credit score. Ready to improve yours? Why not get started now.

Why is Your Credit Score Important?

First, why is your credit score so important?

Credit scores are a number that rates an individual’s ability to repay debt. The higher the credit score, the more likely you will repay a loan and the more likely it is that a lender will approve you for credit.

A credit score is based on information in your credit report, which includes your payment history, outstanding debt and length of credit history. Your credit score can be impacted by many factors including: how you manage your money, how much you owe on loans and whether or not you have any unpaid bills.

Fair or unfair, your credit score will have a huge impact on your financial life and that is unlikely to ever change.

Dealing With Bad Credit Scores

Bad credit scores can make it difficult for people to access the loans they need. This can cause them to struggle to afford their bills, which can lead to financial instability. A bad score can also affect the regular bills that you pay such as car insurance and might even prevent you from getting a job.

When you are struggling with bad credit scores, you should look into ways of improving your score and getting your finances back on track. One option is taking out a bad credit loan to use for debt consolidation, but this should be done with caution as these loans are often more expensive than other types of loans.

One thing that people should consider when dealing with bad credit is whether or not they even have an option for a debt consolidation loan. This type of loan helps reduce the amount of money owed by combining all debts into one monthly payment, which can help improve your score in the long run. The problem is that you generally have to have good credit to get the loan. So, to improve your bad credit, you need good credit. It can be very unfair.

If your credit rating is far gone, you may need to work on the fundamentals first and make improvements. You then might be able to secure a debt consolidation loan to further improve your score. But first, what are these credit basics?

What Factors Affect Your Credit Score?

Credit score is a financial score that measures how likely you are to repay your debts. Credit scores are also used in other ways, like assessing how likely you are to get approved for a loan or mortgage. Your rating is nothing more than a mathematics equation and can therefore be manipulated if you know the factors.

The factors that affect your credit score include:

Payment history.
Paying your bills on time without any late payments. For credit purposes, a payment is late when it becomes 30 days past due.

Number of inquiries.
The more inquiries you have, the more sketchy you look to lenders. It makes it appear as though you are in financial trouble or that you may have more accounts open than is indicated on the report.

Credit utilization.
The more credit that you are using the worse you look. Ideally, you want to have at least 70 percent of your credit available. This means that if you have 1000 dollars in credit, you should have 700 dollars available.

Length of credit history.
A lengthy history shows that you have a track record of keeping up with your obligations. Little to no history looks risky to a lender.

Types of credit accounts held (including revolving and installment).
Lenders like to see a mix of different credit accounts. It shows financial experience.

How Much Does it Cost to Raise Your Credit Score?

There are a lot of myths about how much it costs to raise your credit score. In fact, it is not as expensive as you might think.

No, you can not buy a high credit score, but you can pay off debt, this is where the cost is. With credit utilization making up about a third of your score, every dollar that you pay on your revolving debt will make an improvement in your score, but there is another way to boost your score with no money.

Increasing your credit limit is one such way. It works the same way as paying down debt. If you have a 1000 dollar limit and it is charged up, you have no available credit. Should your credit card company increase your limit to 2000 dollars, you now have 50 percent utilization.

How Long Does It Take To Raise Your Credit Score?

If you want to know how long it takes to raise your credit score, then you should know your debt ratio. It is the total amount of your current debts divided by the total amount of what you owe.

To calculate my debt ratio, I divide the total amount of my current debts (including balances) by the total amount of what I owe. The result is my debt ratio. This number tells me how much money I’m spending on paying off my debts each month and how long it will take me to pay them off if I continue at this pace.

The faster a person pays off their debts, the higher their credit score will be in a shorter time period.

The Final Word On Improving Bad Credit

Improving your credit is very much possible in a bad economy. Unfortunately, it is not something that can be done overnight. It takes time, patience and yes, it also takes money.

Those looking to improve their credit should simply pay their bills on time, reduce their revolving debt, stop applying for new credit and figure out a way to be patient.

Posted by
James Car

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.