Homeowners, owning a property isn’t straightforward. You want to redecorate and create the house of your dreams, yet you don’t have the finance. That new kitchen upgrade with the bamboo flooring will have to wait, then! Otherwise, you run the risk of spending more than you can afford, defaulting on a loan, and ruining your credit. As far as financial decisions for the future go, this is one of the worst.
Sadly, lots of property owners think it’s a wise move, only to find themselves with less money and the urge to renovate. If you fall into this category, it’s essential to resist the temptation to splash out on a new bathroom and concentrate on your credit score. That way, you’ll be able to afford the home that dominates your dreams without sinking dangerously into the red.
Of course, the tried and tested methods don’t always work. Plus, they take an excruciatingly long time to bear fruit. So, why not try the weird and wonderful ways to build your credit instead? The following are out of leftfield, but they might be crazy enough to work!
Take Out A New Loan
With your credit rate being viewed as risky by banks, you might think that this move is out of the question. Anyway, you don’t have the resources to pay it back any time soon, so it will only rack up more debt and harm your score. These are all valid points, yet they fail to consider one thing: trust. You have to show that you’re able to pay back arrears to prove that they can trust you again and re-score your rating. Therefore, a small loan with flexible interest and payment terms could be the answer.
The hard thing is trying to find a lender who will fork out the cash. Depending on your score, there are several options. A bad credit loan is an excellent option, especially if someone is willing to be a guarantor as it adds another level of security. Check out this guarantor loan from Buddy Loans if you are confused. Alternatively, a credit union has fantastic interest rates if you borrow over a long time and commit to saving.
Last but not least, there is a family loan with a twist. Take out a loan in your name and ask to borrow the money from a loved one to clear the balance. Then, pay them back every month without the hassle of creditors breathing down your neck.
Don’t Close Open Credit Cards
In a bid to show that you’re not in over your head, you close down your open credit cards and keep your borrowing limit to the bare minimum. While this is an excellent tactic if you’re trying to live within your means, it isn’t as striking a show of faith as you might think. If anything, creditors might lower your score due to something called ‘credit utilization.’
If you’re not sure what that means, here’s a basic explanation. It’s the difference between the amount you owe and the size of your credit card limit. So, if you have a card with a limit of $10,000 and you owe $1,000, that’s a 10% credit utilization. However, if have the same balance compared against a limit of $5,000, it jumps to 20%. The former is better than the latter because a low utilization is evidence that you’re not reliant on debt. Closing a line of revenue, then, might distort the ratio and make lenders distrust you more.
To boost your credit utilization ratio, this post from Upgrade recommends paying down debt. However, if that’s not possible, the other option is to try and increase your limit. Just make sure you don’t spend the extra cash and negate your good work.
Ask Your Landlord For A Favor
Renting has become a very popular method for young people and those who don’t have the cash for a downpayment on a house. Almost 30% of Americans rented their homes in 2016, and the figure is only going to get higher until the housing market becomes more affordable. Still, while renting might seem like ‘dead money,’ you can use it to your advantage if you pay on time and have zero arrears. The trick is to speak to your landlord.
The reason for this is that your payment history can be logged with credit bureaus, the organizations that keep tabs on your rating. As long as they have the info regarding your rental agreement, they will use it to show that you’re a responsible and trusted payee. All you need to do is ask your landlord if they will start reporting the statistics to the relevant bodies. Small-time entrepreneurs might not be pleased with the request, but properties owned by management companies should be more forthcoming.
They might even do it automatically, which is another reason to be punctual with your rent. That and having a place to live!
And Your Creditors
The idea that creditors are soulless, money-grabbing animals who only care about money isn’t true. It’s not far from the mark, but it’s not 100% accurate either! Jokes aside, you shouldn’t assume they are inflexible. Remember that they are a business with lots of competition that needs to retain a positive relationship with their customers. Sometimes, that means understanding the situation and offering you a way out without harming your rating.
With this in mind, you should pick up the phone and speak to someone who has the power to solve your predicament. Explain that it’s one missed payment and that you only need a few days to pay off the balance. Or, if the problem is bigger, talk to them about a payment plan. What you want to focus on is whether they report you to credit bureaus or keep it off the books. Even if they charge the penalty fee, you want to see if they’ll cut you some slack by keeping it between you.
Granted, the result might be a short-term solution that’s hard to see through, but at least it gives you an option that doesn’t obliterate your credit in a few weeks.
Check Your Credit Report
Filling out a loan application with bad credit is like talking – you can do it in your sleep! Still, that doesn’t mean you’ve crossed the T’s and dotted the I’s’. Unfortunately, the most basic of errors can impact your credit score, from misspelling your name to putting down the wrong address. Because it’s such a tiny mistake, there’s no reason to let it have a major impact on your finances. That’s why it’s essential to check your credit report.
One glance will tell you everything you need to know, and you can make changes on the spot. How do you get access to your report? That’s easy – by asking! This post by Annual Credit Report shows that you are entitled to the information once a year at no cost to you or the credit bureaus. Considering 20% of Americans have errors on their report, and 5% of those are severe enough to increase payment terms, it’s worth going through the process.
Fixing errors on your report can boost your score by a couple of hundred points. And the news gets better. Not only are you allowed to dispute the information, but the bureaus must rectify the mistakes within 30 days.
Protect Your Data On Social Media Sites
After the Cambridge Analytica scandal surrounding Facebook and the Presidential election, the world is savvier than ever before regarding personal information. Accepting terms and conditions without thinking about the consequences now is a lot less prevalent than ever before. And, this is a fantastic attitude to have for the sake of your credit rating as all a thief needs is some basic details. From your full name and address to your email address, they can rack up thousands of dollars’ worth of debt with a click of a button.
There are obvious hacks to ensure you aren’t hacked, such as using strong passwords and securing your server points. As the Federal Trade Commission points out, your WiFi router is one of the most vulnerable spots in your entire house. Of course, encrypting data isn’t the be-all and end-all of the process. You can help yourself by taking down unnecessary info that leads to self-inflicted leaks. An excellent example of this is personal information on social media sites.
The likes of Twitter and Instagram broadcast a series of things, and not just your full name and address. They also give your location to anyone who cares to look. By reviewing your privacy and security settings, you can maintain a healthy and safe credit score.
Yes, paying bills on time and preventing creditors from reducing your score is the best option. But, you can’t always be proactive. When you make a mistake, you shouldn’t let your finances suffer for the foreseeable future, particularly if it’s as insignificant as a change of address.
So, aside from using the advice above, don’t forget this: you must track your score. How can you make changes if you don’t know there is a problem?