For many, the difference between having bad credit and average credit is like night and day. With fair credit, searching for a place to live or shopping for a car suddenly becomes much easier. You can even qualify for lower interest rates with fair credit credit cards, which could save you a bundle in the long run.
If you’re looking for ways to boost your score, here’s where you should start:
Identify the problem
If you don’t know why your credit score is low, it’s difficult to fix it. Start by requesting a free annual credit report from each of the three credit bureaus — Experian, Equifax and TransUnion — and looking for problem areas.
Some items, such as like foreclosures and bankruptcies, will stay on your credit report for seven years, and there’s nothing you can do about it. But if your score is taking a dive because of late payments, make a point of being more punctual with your bills. Because recent credit activity is weighted more heavily than old activity, making a small change like this could make a big difference.
Build an emergency fund
Relying too much on credit during hard times can lead to over-borrowing, large outstanding debts and late or missed payments, which can hurt your credit. Avoid returning to these bad habits by establishing an emergency fund.
Put aside a small amount of your earnings every month. Even if it’s just 2% a month, you’ll have more money to fall back on the next time you have to deal with one of life’s little surprises.
Get a secured credit card
To qualify for a fair credit credit card, you need to build up a good credit history, and a secured credit card is a good place to start. Because these credit cards require a security deposit as collateral, they’re easier to qualify for. Find a credit card that reports to all three credit bureaus, and your on-time payments will help you build your credit.
When it comes to rebuilding your credit, let consistency be your watchword. Make sure your recent credit history reflects your best habits and guard against using your credit card for things you don’t really need. By spending less than 30% of your credit limit and paying on time every month, you’ll boost your score and lenders will start to look at you more favorably. After awhile, your card issuer might offer to upgrade your account to an unsecured card.
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The post From Poor Credit to Fair Credit: The Road to Improvement appeared first on NerdWallet Credit Card Blog.
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