Sun. Nov 24th, 2024
Having back taxes

Your credit score has a huge impact on your life. Most major purchases, like home and car loans, won’t be given to someone who doesn’t have an excellent credit score. The same can be said for getting credit cards in your name. Pretty much every aspect of your life is touched by the financial decisions you may and by your credit score. Therefore, improving your credit score benefits you greatly.

For many people, that’s easier said than done. Maybe they have a history of paying their bills late due to a job loss or their debt-to-credit ratio runs too high. If you’re challenged by any of these issues, then you know how frustrating this can be. However, there is no need to stay in your frustrated state for long. If you adhere to the five following tips, then you’ll eventually see your credit score improve, sometimes by as much as 100 points.

1. Live way Below Your Credit Limit

Most financial advisors will tell you that it’s wise to keep your credit use low. That means that your debt-to-credit ratio isn’t more than 30%. If you do have credit cards, then it would be best if you could pay them off each month. Paying off your cards not only relieves you of some debt-burden, but it also improves your credit score significantly – by about 100 points.

There’s a trick you can employ if you go this route; instead of making one big payment each month, make several small ones. These micropayments can add up quickly. They also give your creditors plenty of opportunities to add positive information to your credit score.

Finally, some creditors also have a system where you can get email alerts or text messages from them, which let you know when you’re nearing your credit max again. That should help you keep the balances low.

2. Get Late Payments Caught Up/ Fixed

You need a two-part plan to help you deal with late payments. If you have any late payments, then you’ll first want to get those caught up. Not only will this help your credit score, but it will also give you some leverage with your creditors for the next step.

After you’ve gotten caught up, then contact your creditors to see if they will remove the late payments on your credit report. Late payments put a ding on your report; those marks remain on your credit for as many as seven years.

This counts as one of the most important steps in your plan to improve your credit score. Your payment history affects your credit score more than any other factor.

3. Pay Your Taxes

Having back taxes to pay can seriously wreak havoc on your credit if you let the issue go for too long. Like any other bill that you’ve gotten behind on, your tax bill can affect your credit.

It’s important to note that a back tax bill doesn’t immediately go on your credit; the IRS will attempt to give you enough notice and enough time to pay your bill. The implications of this to your creditors is that you won’t pay the bills that you owe even if you’re given enough time to do so.

4. Don’t Apply for New Credit Unless You Need It

Applying for multiple credit cards and loans puts inquiries on your credit report. Too many of these in too short of a time frame looks bad on a credit report. It’s certainly something that creditors will look for if you do ask for more credit. A hard inquiry on your credit report remains there for a couple of years.

5. Fix any Incorrect Information on Your Credit Report

Things happen. Sometimes, a creditor may report that you had a late payment when you didn’t. Maybe another person’s credit inquiry wound up on yours; it happens sometimes when two people have the same name.

Regardless of why the erroneous information is on the report, you should make an effort to get it removed. Nowadays, it’s easy enough to do a credit check using websites, like CreditKarma.com.

Once you sign up for the service, do be sure to check your credit regularly. This not only allows you to correct any mistakes that appear on your credit report, but it also helps you prevent fraud should someone else have taken credit out in your name.

It takes work to improve your credit score. Fortunately, there are many things you can do to make this happen, and most of them are pretty simple. They just require time and a bit of effort.

Paying your back taxes or paying off your credit cards show that you can and do pay your bills on time: Remember, that’s the biggest part of your credit score. You can additionally make sure that all of the entries on your credit report are correct and that you don’t apply for credit you don’t need.

Finally, to prevent yourself from getting into debt in the first place, make sure that your debt-to-credit ratio isn’t higher than 30%.

By admin

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