How to improve a bad credit score

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Having a good credit score does wonders to your finances. But what if you’ve accumulated too much debt or skipped several payments? Your credit score will surely take a hit and lenders would hesitate to grant you more loans, which could be problematic especially when you need it the most. You will be charged higher interest rates or offered lower spending limits.

So how do you improve a bad credit score?

1. Get a credit score report

You can request a credit report from the Credit Information Corporation (CIC). A credit report contains your personal information as well as important details about your loans, mortgages, credit cards, and other financial transactions. In turn, lenders use this information to decide whether to grant you a loan or not.

2. Pay off existing debt

Not only will paying your debt give you a peace of mind, it will also give banks and lenders the impression that you have the capacity to repay every loan or credit.

3. Avoid late payments

Sometimes, we skip out on our due dates for various reasons. But not paying your bills on time can tank your credit score. To avoid this, set a reminder before every due date or automatically deduct payments from your bank account, and keep track of every outstanding bill.

4. Be mindful of your credit limit

Going overboard on your credit cards gives lenders the impression that you’re highly dependent on credit. Also, space out your credit card and loan applications as much as possible. This can lead banks to assume that you’re spending more than you’re earning and will lead to a lower credit score.

5. Consolidate your credit debt

If you’re finding it hard to pay off all your debts, you can look into consolidating them all into an account with lower interest rates. For example, a balance transfer credit card has interest rates ranging from 0% to 2%, so most of your payments will cover the principal balance instead of the interest.

A bad credit score does not automatically mean that your financial standing has been permanently damaged. While it may take some time to build it back up, doing little steps like the ones we outlined above can make a huge difference.

So next time, before you apply for a cash loan or swipe that card, make sure that your monthly budget can cover these expenses to avoid incurring debt. Also choose credit cards or lending companies that offer the lowest interest rates, perks that negate the interest rate, and easy repayment options.

Speaking of loans, UnaCash offers low interest loans and easy repayment options. Download the app and apply for a loan with just 1 valid government ID!

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