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| Education and Financial

06/10/14

Score bored: Your credit score is sagging, so how do you fix it?

Strolling through the car lot or checking out the for sale signs in a particular neighborhood gives you reason for optimism that you'll be able to buy the things you want and need without much of a headache.
Then, you see your credit score.
Nothing sends fear through your body quite like seeing a score that is between the 500 or 600 mark. At that point, you know that getting that new or used car or applying for that mortgage loan still is possible, albeit a long shot with those types of scores. In addition, lower credit scores equal higher interest rates, along with plenty of financial institutions and banks that won't be interested in you at all as a client.
With that, your dreams of home ownership or zipping around in a vehicle that actually runs are put on hold until that score starts to rise.
Raising your credit score isn't something that is going to happen overnight. The score is in that range for a reason, whether that's because of not paying your loans or credit on time or your income isn't quite high enough to compete with your debt.

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But that doesn't mean you can't start heading in the right direction when it comes to your credit score with just a few tweaks and changes to how you handle your money. First and foremost is analyzing your budget and determining if things can be eliminated so you can begin saving money. That includes eating out at restaurants or high end entertainment fixtures like cable or cell phone plans that could easily be dropped to a lower monthly rate.
That extra cash can go into a savings account but if your credit score is poor then you should use that extra income to pay down some of your existing debt. Creditors look at your income versus your debt, so paying down the latter will help that ratio remarkably.
You also should steer clear of opening up new credit at any point, and if you're paying off debt that you already have, stick to the debt that is considered "bad," like credit cards or anything that can't be linked back to something tangible (car, school loan, etc.). Unsecured debt is difficult for creditors to justify.
Perhaps the most important part of pulling your score out of the basement is just paying bills on time. Missing a few payment might mean your score dropping even more than it already is. Debt consolidation might be a way to go, since most of the day that is considered a lateral move and won't necessarily hurt your score; it also shows consistent payments can be made.
You also want to make sure you don't get overly frustrated with your score and look at raising it as a year or two endeavor. In the long run, you might have to wait for the things you want, but it will be more than worth it the next time you have your credit report pulled.

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