Tax time is almost here, and lots of people are already preparing their returns. If you have poor credit, you may be thinking about using your tax refund to make improvements. A variety of credit repair strategies exist, so it can be difficult to decide how to approach the problem. Below is some information to help you decide how to put your tax money to the best use.
Ways to Improve your Credit
The most common methods used to improve credit include professional credit repair, DIY strategies and investing in tradelines.
Professional Credit Repair
Professional credit repair companies offer to improve your credit for a fee. Some lawyers also provide credit repair services. Most reputable credit repair companies and lawyers begin by analyzing your credit report and looking for questionable entries, repetitive entries or other inconsistencies. The professional will analyze each of these issues and take steps to fix them.
Keep in mind that not all credit repair companies are reputable. Some will promise services they can’t deliver and/or use illegal tactics in an attempt to raise your credit score quickly. Some unethical credit repair companies have also been known to scam consumers by collecting a fee and then failing to provide promised services.
Instead of investing in credit repair, some people may decide to attempt to improve their credit without help in hopes of saving money. Some of the strategies you may use to improve your credit without professional help include:
- Disputing duplicate and/or fraudulent entries on your credit report by contacting credit reporting agencies and creditors directly.
- Using secured credit cards.
- Applying for new credit or larger limits to reduce debt-to-income ratio.
- Taking out new loans.
- Paying down debts.
- Pay all of your bills in full and on time.
Although these strategies can all improve your credit over time, it can take months or even years before you begin to see results.
Investing in Tradelines
Tradelines are active credit accounts with a long history of on-time payments. When you purchase a tradeline, the owner of the account adds you as an authorized user. Once the account has been added to your credit report, it can improve your score by raising your available credit, increasing the average age of your accounts and enhancing your payment history.
Making a Choice
You receive a tax refund only once each year, so it’s important to use it efficiently. Although each of the methods above can improve your credit when used properly, tradelines provide the quickest results. However, as with credit repair, it is important to note that tradelines are offered by both reputable and non-reputable sources. To avoid falling victim to a scam, make sure that you acquire tradelines from a trustworthy source.