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If you think that the only way you can improve your credit situation is to make sacrifices, you are wrong. The truth is, there are ways that you can improve them without doing anything - literally. There is a lot of pressure from our society to have a good credit score because there are so many ways that you can be hurt by a bad credit history. If you lived a few decades ago, you wouldn’t even know what this would mean. But since credit has become a norm in this country, the financial industry had to find a way to make borrowing fair for everyone. A good credit score means a consumer is responsible when it comes to borrowing money. They pay their dues on time, borrow only what they can pay back, apply for one credit account at a time, and keep their credit utilization low. If you have a good score, you can be trusted with a loan because you are a low-risk borrower. That means the lender or creditor do not have to worry about you missing out on your payments. Since you can be expected to pay what you owe, they do not have to protect themselves by giving you a high interest on the credit account that you want to open with them. Now a good credit history means you need to use credit all the time. This where some people end up failing their credit scores. There is a big difference between using credit and being in debt. What some consumers fail to understand is that you can have a high credit score and not be in debt. But of course, that would mean using credit wisely. Unfortunately, this is a hard task for most people. According to a study done by ConsumerFinance.gov, a lot of people are credit invisible. This is probably because some of them choose not to use credit at all for fear that they will end up in debt. The report mentioned that as of 2010, 26 million Americans do not have a credit history - at all. Not only that, there is 19 million who have a credit history but it is so thin it cannot be measured. That is a total of 45 million consumers or 19.3% of the consumers. If you are one of the people in this statistic, you obviously need to improve your credit. Of course, there are other people who do not have a good credit score because they have too much debt. Bottom line is, there are so many things that could go wrong for you if you do not do anything about your credit situation.
Improving your credit without lifting a fingerSome people are turned off about improving their credit because they feel like it is very hard to do. The truth is, it does not have to be difficult. Believe it or not, it is possible for you to literally improve your credit without doing anything. Here are some of them.
- Do not use your credit cards. One of the reasons why some people are in a bad credit situation is because of their high credit card balances. If you want to improve your credit situation, you need to stop using your cards while you pay them off. As you pay your balance, you are increasing your credit utilization rate - which is basically your balance to limit ratio. That will help you boost your score. Take note that you can live without a credit card and still have adequate credit history.
- Do not close your credit card accounts. Some people think that closing their cards will help them raise their credit score. That is not true. You will be getting rid of the temptation to use credit to spend more than what you can afford. However, you are not helping raise your score. In fact, you are making it worse because you will be damaging your credit utilization rate. If you really want to get rid of the temptation, you can keep your cards where you cannot reach it easily. In case you really want to get rid of some cards, you should close them one at a time. Another thing that you need to understand is that old credit accounts will do your history some good. The more old accounts that you have, the higher your score will be. So try not to close your account - at least, until after you improve your credit score.
- Do not apply for more credit. If you are still paying off other loans, you need to keep yourself from borrowing more money. Even if there is a good deal that makes home buying very appealing, you need to think about your existing debts very clearly. Be wise about opening more accounts because the more debt you owe, the lower credit score you will have.