Tips to boost your credit score if you want to get a debt consolidation loan

We all have bills, and the challenge for some people is how to clear them. Because of this, most people find themselves in situations where they are dealing with hefty debts, which are hard to handle. When it comes to this, people result in one solution—getting a debt consolidation loan.

Payday loan consolidations are a type of debt refinancing, which involves getting one loan to clear all your debts. After that, you only have one debt to clear, which is much easier than handling numerous debts at once. However, there’s one hurdle that most people have to overcome before getting a debt consolidation loan—improving their credit score.

A poor credit score can reduce the possibility of securing a debt consolidation loan. But, you don’t have to fret in case you have a bad credit score since there are ways to improve it. With that, let’s look at the top tips to help you improve your credit score.

Verify your credit report

Does your poor credit score surprise you? Well, verify its accuracy before taking any action. According to federal law, you can get a free credit report every year from three primary credit reporting bureaus. Therefore, take advantage of this opportunity, and compare your credit score reports from each bureau.

In case you notice any errors, omissions, or discrepancies, consult the bureau to get additional information. Although credit scores are reliable indicators of a person’s financial standing, they are not dependable. Therefore, it’s always a good thing to take your time to verify your reports to ensure that it’s accurate.

Avoid stalling your bills

If you have a spiking debt, it’s very easy to let your monthly bills go un-cleared. However, this can come to haunt you later. Please note that your credit score greatly depends on how you clear your debts. Therefore, if you make your payments past the due date, it can be a serious red flag to lenders, since they expect to be paid on time.

And, although you cannot change your past mistakes, you can change your future by paying your bills on time. Besides, you must live within your means, to avoid struggling with clearing your bills. And, if possible, set payment reminders on your phone to avoid the issue of dealing with overdue payments.

Reduce your credit card balances

Did you know what your debt-to-credit ratio can affect your credit score? This ratio determines the revolving credit you use compared to your total credit limit. So, if you are used to accumulating huge credit card bills and paying little amount every month, you should consider changing your habits.

There is a possibility that you have a big ratio, which can deter you from securing a debt consolidation loan. Generally, you should keep your debt-to-credit ratio below 30{e62b1cc2c5bcb08685dcb5ff2d86b655fc12088eb661ce7b3449471223946b50}. To lower your ratio, you should stop any unnecessary spending, and concentrate on reducing your credit card balances.

Don’t shun your credit card

One of the best ways for to update your credit report with new information is to avoid shunning your credit cards. Although you might be tempted to make cash payments when you start managing your debt, using your credit card a few times and responsibly can help to improve your credit score.

All you need to do is to avoid accumulating balances and making sure that you pay your credit card bills on time. With this, you can easily build a strong credit history. Avoid making purchases that you cannot afford at the moment with your credit card.

Pay your debt

So long as you have a positive cash flow, take advantage of this to boost your credit score by clearing your debt bit by bit. There are two methods to do this, and each method requires you to make the minimum mandatory payments every month.

These methods include:

  • Debt avalanche method – here, you will use your extra money to pay off the credit card with the highest APR (annual percentage rate).
  • Debt snowball method – this is the opposite of the debt avalanche method, as you will pay off the credit card with the lowest balance.

Each of these strategies requires one to continue making the payments until their debt is fully paid.

Bottom Line

If you are wondering whether you can improve your credit score, that’s possible—you can do it a step at a time. It’s very frustrating for your payday loan consolidate application to be declined because of a poor credit score. However, some lenders are willing to work with people who want to improve their credit score, regardless of how low it might be.

And, while some of these arrangements can come with very high-interest rates and restrictive terms, they can help you to boost your credit score. But, you should always aim for ways that can help you better your credit score, even if it will take you longer than expected.