Credit scores are determined using information in your credit reports and take into account factors like how on time you pay back debt, utilization rates (balances vs. limits), length of credit history and whether there is a mix of revolving accounts and installment loans such as auto, student and personal loans.
1. Pay Your Bills On Time
Your credit score depends heavily on how on time and consistent you pay your bills, making payments according to loan or credit card repayment terms is key in building good credit.
Credit scores under 600 are considered poor and could impede your borrowing opportunities, however with hard work and patience it’s possible to turn it around into fair or good territory.
When your credit score falls under 600, the most effective way to increase it is through on-time payments and maintaining low credit utilization ratios – calculated as total balance divided by total credit limit on each card. If making timely payments is becoming challenging for you, consider asking a loved one to add you as an authorized user on their card – its positive effect may more than offset any potential negative implications in terms of utilization ratio.
2. Keep Your Credit Card Balances Low
Maintaining an ideal credit score can make borrowing money simpler, with potentially better loan terms available to you. A healthy score also makes qualifying for credit cards easier, and may help get approved for home or auto loans.
Credit card balances can have a detrimental effect on your credit score if not paid by their due dates. Your credit utilization ratio plays an essential part in calculating your score; experts suggest keeping it below 30% for optimal performance.
Keep your credit utilization at bay by only using a portion of each card’s total credit limit and making payments on full amount each month. This will help prevent the accumulation of debt while paying down old balances will help speed up improvement to your ratio faster.
3. Don’t Apply for New Credit
Though having a credit score below 600 is still considered subprime and may prevent you from accessing the best offers and loans, most lenders still approve applicants with scores around 600 for certain products such as personal loans or even some credit cards.
Avoid Applying for New Credit until You Clearly Need It when considering new accounts to open. Applying for any account can cause an inquiry on your report and temporarily lower your score, plus opening new accounts reduces the average age of your credit account which factors into calculating it.
Instead, focus on building up your existing credit scores by increasing the credit limit of an existing card or opening a secured credit card (which works like traditional cards but requires an upfront deposit equal to your credit line). Make sure to pay on time and keep balances low in order to improve your score further.
4. Don’t Open New Accounts
Under both FICO and VantageScore scoring models, any credit score below 600 is considered subpar. A higher credit score may enable individuals to pay less for loans such as home or car purchases; get better terms on personal loans; or be approved for more credit cards.
Importantly, don’t apply for new credit unless it’s truly necessary. Each application creates a hard inquiry on your report that can bring down your score by several points. Furthermore, try not to close accounts that you no longer use – lenders appreciate seeing long credit histories, so keeping open older accounts may actually help increase your score!
Improving your credit score can be well worth your while, with beneficial changes potentially yielding positive results within minutes. Sign up now for a free Experian account to see where your score compares against others!
In conclusion, it is feasible to raise your credit score if it is below 600 with perseverance and commitment. You may gradually expand your credit use and start raising your credit score by making on-time payments and maintaining a modest credit card balance. Additionally, wait to apply for additional credit until you truly need it because every application will temporarily drop your score.
Is it possible to get a mortgage with a credit score under 600? Most lenders find it difficult to approve applicants with credit scores below 600 for mortgages; but, in exceptional circumstances, such as when there are other sources of income or money available as security against the loan, some lenders could still be ready to do so.
Iskra Banović is our seasoned Editor-in-Chief at BlueFashion. She has been steering the website's content and editorial direction since 2013. With a rich background in fashion design, Iskra's expertise spans across fashion, interior design, beauty, lifestyle, travel, and culture.