Your credit score can be hard to grow by 100 points while you’re in debt. A good or excellent credit score can be maintained through good financial habits.
You may apply for a low-interest loan to pay off your other high-interest loans or transfer credit card balances to a card having a zero-interest balance transfer fee. These options might provide you a safe passage to get away from debts; but, to take advantage of those options poor credit could be a hurdle for you.
If you’re searching for ways to get out of debt and also increase your credit score, consider the below-given options.
1. Check out credit card balances
The most important factor in your credit score is your credit utilization. Credit utilization denotes the percent of credit you are using from your available revolving credit limit. The lower that percentage, the better for your credit rating. The optimum percentage of a credit utilization ratio is 30 or lower.
So, if you want to boost your score, try to pay off your balances every month and use your available credit as low as possible.
You can also check if your credit card company will accept multiple payments in a month.
2. Avoid applying for several new credit cards
Don’t apply for several new credit cards. Try to avoid it as this approach could backfire and hurt your score very badly. If you really need to open a new credit account, maintain it wisely and make payments on time.
On the other hand, don't close unused, old cards to raise your score. Keeping old credit card accounts are good due to their long credit history.
3. Set automated payment reminders
Making on-time payments is helpful for building a good payment history and to boost your score.
Few banks offer payment reminders through their online banking system, this facility provides you advance notifications through Emails or text messages about your coming payment dates. You could also enroll in an auto-debit payments facility provided by your credit card provider.
No matter what option you choose, the thing is you have to pay on time every month.
4. Pay off debt in collections
In some special cases, once you get a negative mark on your credit report, there’s no other way you can remove it easily.
A negative mark’s effect will be removed over time, but it may take 7 to 10 long years to be fully dissolved from your credit report.
However, the latest FICO Score and Vantage Score don’t retain some negative items like already paid collections accounts. So, if you can pay off balances on those accounts that are currently into collections, it would have a prompt positive effect on your score.
5. Use cash instead of credit cards
It is the best way to reduce your credit utilization ratio. You can start making any type of payments by cash instead of your credit cards. It’ll keep you from winding up in more debts in the coming days. Try to stick to your decision firmly until your debts get under control.
6. Try to maintain different credit types
Try to maintain different types of credit lines successfully. Regular payments on student loan, auto loan, mortgage payments and credit card bills will portray your credibility through a good credit score.
7. You need to budget your finances
Budgeting is especially good for repairing credit while having debt burden. Through budgeting, you can separate your funds for daily expenses, debt payments, and emergency expenses. By this way, managing your finances as well as credit repairing will be a lot easier.
The toughest part of improving your credit score while being in debts is keeping the patience. You will definitely achieve an appreciable effect, but it will take time to reflect in your score. There is no quick fix to grow your credit score sky high; it’ll take few years to grow.
Read more:
What are the grave mistakes you need to avoid while building credit?
What are those credit score killers that you must avoid?