A credit score is a three-digit number that is used to represent a person’s creditworthiness. The score is based on a number of factors, including payment history, credit utilization, length of credit history, and new credit. The higher the score, the more likely the person is to be approved for a loan and to receive a lower interest rate. Even if you have debt collections or bad credit history, there are still many other ways you can improve your credit. Keep reading below to find out how to improve your credit score even when you have collections.
Table of Contents
Find a new credit card to do a balance transfer.
Collections can stay on your credit report for up to seven years, so it’s important to start working on your credit score as soon as possible. A credit card balance transfer can be a great way to consolidate your debt and save money on interest. Leaving a balance on your credit card can lower your score. By transferring your balance to a new card with a lower interest rate, you can save hundreds or even thousands of dollars in interest charges. Some credit cards are meant for balance transfers and provide plenty of perks. For example, you can get a welcome bonus upon account opening or get 75,000 bonus miles after spending $4,000, according to Forbes. There are rewards credit cards that give you perks for spending a specific amount within the first year or making a travel purchase. Just be sure to budget for the balance transfer fee, which is typically three to five percent of the amount transferred.
Pay off your collections.
The best way to improve your credit score when you have collections is to make a plan to pay off your debts. Organize a plan and decide how much money you can afford to pay toward your debt each month and when you hope to pay them off. Cut back on your expenses and put the extra money towards your debt. Your first priority should be to pay off the card with the highest interest as quickly as possible. This will save you money in the long run, because you will be paying less interest over time. But if you consolidate your debt into one card as mentioned in the previous step, it will be easier to simply focus on making one payment instead of multiple. No matter which method you choose, the most important thing is to stay motivated and stay focused on your goal. Paying off your credit card debt can be a challenging task, but it’s definitely worth it in the end.
Obtain a free credit report and dispute inaccurate information.
It’s important to get a copy of your credit report so you can see what’s affecting your credit score. You can get a copy of your report for free once a year from each of the three credit bureaus. In the event that a billing company doesn’t have accurate records and sends your bill to a collections agency, the collection will show up on your report. If you see inaccurate information on the report, you should always do your best to dispute it. You can dispute information on the report by sending a letter to the credit bureau or speaking to someone on the phone and providing the evidence required.
Get professional help if you need it.
No one is perfect, and everyone makes mistakes. This is especially true when it comes to your finances. If you have collections on your report, it can be difficult to improve your score. However, it is not impossible. If you are struggling to improve your score on your own, it may be helpful to get professional help. A credit counseling service can help you understand your history and develop a plan to improve your score over a period of time. This will involve how and when to pay off debt, how to consolidate your finances, and figuring out your next steps.
By following these tips, you’ll find it easier to increase your credit score.