shutterstock_291794135Taking out a loan is often necessary in order to make a big purchase, but qualifying for a loan becomes difficult if you have a bad credit score. Lenders use credit scores to determine the risk associated with the borrower. A bad credit score tells lenders that you’re not financially responsible and that you may not pay your loan back on time – or at all. A low score can also affect the terms of a loan. A bad credit score is generally considered to be around 550, while 750 is considered an excellent credit score.

The following are the steps that you’ll need to take in order to improve your bad credit to excellent credit within 12 months:

Put all of your bills on automatic payments

One thing that will hurt your credit score is not paying your bills on time (or not paying them at all). By placing your monthly bills on automatic payment, you’ll ensure that you’ll never be late.

Focus on paying your debts

Get a copy of your credit report and make a list of all the debts that you have. The order in which you pay down your debts is important. In fact, if you pay down the wrong debts, or you pay your debts down in the wrong order, it could actually hurt your credit score. Here are some tips for paying down your debts:

  • Ignore debts older than six years – Delinquent accounts can only show up on your credit report for a period of seven years after your first delinquent payment was originally due. This means that within a year, any debts older than six years will be removed from your credit report, which means that paying these off won’t help. The only exception is if you have student loans.
  • Look at the debts that you know you can pay off – Some debts you may not be able to pay completely off within a year. Only focus on those debts that you know you will be able to pay completely off.
  • Contact your creditors – Before paying off those debts that you can, contact the creditor and ask them to withdraw their submission of unpaid debt from your credit report. Tell them that you are prioritizing your debts by who will remove their unpaid debt claims from your report. If they don’t remove it, you’ll focus on paying off a different debt instead.
  • Dispute debts – Always dispute debts if you think they are incorrect. The negative information will have to be removed for thirty days, during which the company that listed the debt must prove that the debt is owed and correct, which they often can’t do. Just don’t send more than one debt dispute a month or you’ll gain a reputation as a frivolous disputer.

If you have bad credit, then use these steps in order to improve your credit by as much as 200 points within one year. For additional advice on improving your credit, visit us at Boost My Score today.