5 Tips to Get Your Credit Under Control

5 Tips to Get Your Credit Under Control

September 15, 2022 Off By Aldo Thomas

Your credit score can affect a lot more than you might realize. It can determine whether you are able to purchase a house and the type of interest rates you get approved for. A good credit score can help you achieve financial freedom, while a bad score can make your life more difficult. This article lists a few ways to improve your credit score, so you can improve your life. 

1. Apply for a Secured Credit Card

A great way to improve, or even build, your credit score is with a secured credit card also known as a credit builder card. These cards are similar to traditional ones, in that you can make purchases and should make your payments on time. The difference, however, is that secured credit cards require a cash deposit upfront.

This deposit is typically the same amount as the card’s credit limit and works as a safeguard. For this reason, secured credit cards are typically easier to get approved for than traditional ones; especially for those with poor credit scores. 

When shopping for a secured credit card, make sure you do your research. While many work the same, they can come with different features. For instance, some cards have a minimum cash deposit or high-interest fees, while others don’t. You also want to make sure the card reports credit activity to all three of the major credit bureaus.

2. Limit Credit Card Applications

While having an additional line of credit could help improve your score, this doesn’t mean you should go overboard. Believe it or not, applying for multiple credit cards at a time can actually lower your score. Why? Because every time you apply for a credit card, creditors run what’s called a hard inquiry to review your financial information.

There are two types of inquiries — soft and hard. Soft inquiries are when you, or someone you’ve allowed, reviews your credit score. This type of inquiry has zero impact on your credit score. Hard inquiries, on the other hand, are typically pulled by lenders or credit issuers and often lower your score. 

While hard inquiries are sometimes necessary, you don’t want too many done at once. Doing so could significantly drop your score. Hard pulls can also affect your score for up to 12 months.

3. Make Payments on Time

While there are many tips for improving your credit score, one strategy beats them all. Can you guess what it is? It’s making payments on time, every single time. Late payments can drastically lower your score. It also causes you to acquire interest, and you’ll end up paying more money in the long run. 

Payment history makes up a majority of your credit score, accounting for 35%. Because of this, ensuring you make payments on time is a critical step to improving your credit score. If this is something you continuously struggle with, consider putting a strategy in place. For instance, you could set up calendar reminders when payments are due. You could also set up automatic payments, so you don’t have to think twice about it. 

If, for some reason, you still struggle to make a payment on time, contact your creditor immediately. Some creditors will work with users by putting them on a payment plan, rather than reporting the late payment. This can keep the payment from impacting your credit score. However, this isn’t something you want to assume will happen. As a rule of thumb, do your best to make payments on time.

4. Become an Authorized User

An authorized user is someone who essentially piggybacks on a primary cardholder’s good credit. You simply have someone who is willing and has a good credit score add you to their credit card account as a user. This means you’ll be able to use their credit card as if it were yours. But you won’t be legally responsible for the payments. 

The main benefit of becoming an authorized user is that you’ll reap the benefits from the primary cardholder. Their good credit history can improve your credit history and credit score. Keep in mind that the opposite is also true. If the primary cardholder has poor spending habits, that could actually lower your score. 

While the process of becoming an authorized user isn’t difficult, not every credit card company offers this option. You might also struggle to find someone willing to make you an authorized user, seeing as it can negatively impact them. Make sure you do your research on the credit card company. You also want to become an authorized user for someone you trust and that trusts you.

5. Review Your Credit Report

As you know, your credit history is what makes up your credit score. A credit report is a statement detailing your credit history. While you might think your credit report is perfect, there may be errors negatively impacting your score. Studies show almost 80% of all credit reports contain errors. Because of this, one of the first steps you should take to improve your score is to review your credit report.

To pull a free credit report, simply request one from one of the major credit bureaus — Equifax, Experian, or TransUnion. Then, check the report for mistakes, like false personal information or payments incorrectly marked late. While these mistakes might seem small, they could be the reason behind your low credit score. 

If you find mistakes in your report, file a dispute as soon as possible. It can take credit companies weeks to investigate, so you want to make it known sooner rather than later. In addition to catching mistakes, reviewing your credit report is a great way to learn what’s impacting your score. After a quick scan, you might notice a history of late payments or a lack of credit variety. In short, pulling a copy of your report can help educate you on credit scores in general.

Improving your credit score takes time. It’s not something that’ll happen overnight, but don’t let that deter you. Integrating the tips above and staying disciplined, can help you get your credit under control.