Paying down high levels of debt is one of the best ways to improve credit problems and increase one’s credit standing. But many people cannot do that so quickly, especially in this economy. About one-third of a credit score is based off of a credit utilization ratio, which is the total creditbalances divided by the total credit limits. A great target is to use no more than 30% of one’s available credit. A quick tip for increasing credit scores for those that do not have the money to pay it down at the moment would be to ask their lenders to increase their credit limit. This will decrease the credit utilization ratio, thus helping credit scores increase. Be careful though, as this increase in limit can be tempting to those that make purchases on plastic rather than cash. This is meant to only be a quick fix to credit problems if one can qualify for the limit increase.
Another main ingredient for solving credit problems is to pay the bills on time. Even if there are past late payments, one can still improve their credit scores if they commit to paying them on time moving forward. A score decreases as soon as a derogatory item hits a credit report, such as a late payment, collection or charge-off. As that derogatory item gets older, credit scores start to improve. So just by committing to pay bills on time, one is already on the right path to fixing credit problems.
Thankfully, there are many options to get out of debt and resolve credit problems. Each alternative has its benefits and drawbacks, depending on what kind of debt one has and how quickly one is looking to become debt free. Such options include a home refinance, getting a personal loan, negotiating better terms with creditors, consumer credit counseling and debt settlement. For those looking to resolve their credit problems, it is very important to thoroughly research all the possibilities and ultimately choose one that makes sense with their financial goals.