In life, we cannot always erase the past but we can try to learn from our past missteps to move forward. If there are some mistakes we had in the past, we can always find a way to learn from them. The same is true with our financial situations. Late payments, high credit card balances, accounts in collections, or it can be as worse as a foreclosure, will surely affect our current credit standing. And with these factors in mind, our low credit score affects the chances of our loan applications being approved, or having favorable terms and conditions in the form of low interest rates. The problem is, if you are someone with a low credit score, lenders would consider you as someone not worth lending to because if they decide to lend you money, the chances of them getting back their money would be at risk.

If you are in a kind of situation of having a not-so-ideal credit standing, then you should plan ahead and think of ways on how to improve your situation. Luckily for you, there are several actions you could take to raise your credit score and increase the chance of having your loan applications approved. In this article, Fix Bad Credits share five simple steps that you can do to improve your credit score.

1. Go Through Your Credit Report

Your credit report will tell you the items or factors that are bringing your score down. By knowing these factors, you can focus your efforts in fixing what needs to be fixed. Reviewing your credit report is the best starting point if you plan on taking some steps to improve your score. By looking at the report, you can see your financial history, your payment history, credit card balances, credit utilization rate and a number of other factors which affect your credit score. You can see if you have late or missed payments, accounts in collections, and/or high outstanding balances. You need to know what’s causing your low score to be able to make an effective plan in bringing your score up. This is the importance of going through your credit report – you need to know the problem to come up with the right solution. You cannot effectively adjust your financial behavior if you do not know what’s the problem that needs fixing.

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2. Correct and/or Dispute Errors in the Report

After going through your credit report, you might find some errors or inaccuracies appearing on it. Take some time to correct these errors. You can start by calling and politely asking the appropriate reporting agencies to correct these errors. This is a simple step which requires minimal effort on your part and it can actually bring your score up in a short amount of time.

If you are certain that there are mistakes in the report and you have proof to back up your claim, then it’s best to dispute the errors or mistakes appearing in the report.

3. Always Pay on Time

Credit firms are very cautious with the way they handle their money and they want to give their money to a person whom they can trust. There is no greater strategy in improving your credit score than paying your debts on time. Your credit score largely depends on your payment history. If you consistently settle your obligations on time, then this will reflect in a high or better than average credit score. If you are paying your bills on time on a consistent manner, lenders would likely trust you with their money because of how reliably you paid your bills in the past. A good lender would not want to risk lending his money to a person who always misses payments or pays his/her debts late. So if your credit report says that you have a good payment history, it is more likely that your credit score would be above average, if not higher.

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To avoid late or missed payments, you can opt to take advantage of automatic payments offered by major banks and credit unions. Some banks’ online portals also let you set up reminders for timely payments.

4. Lower Your Balance

Another important determinant of your credit score is your credit utilization rate. This ratio is derived by the amount of credit you have used and its proportion to the amount of credit extended by your lenders to you. A low credit utilization rate translates to a higher credit score. Thus, if you want to improve your score, you need to lower your outstanding balance to lower your credit utilization ratio.

5. Apply For New Credit Only When Absolutely Necessary

Applying for new credit in a short time frame can hurt your credit score because it creates a hard inquiry on your credit report, thus, bringing down your credit score. It is advisable not to apply for new credit within a short period of time if you are trying to improve your credit score.

If you are planning on applying for a loan and you want to have it approved as quickly as possible while getting the best terms and conditions as possible, you can start taking the steps outlined above to boost your credit score. Some of these steps require minimal effort on your part but they can go a long way in bringing your score up.