What would you do for an excellent credit score? If you have bad credit, you might be willing to make a deal at the crossroads for the chance to improve it.
It may sound extreme, but having excellent credit opens a lot of doors, making everything easier — from getting a loan to renting an apartment.
Luckily, you don’t have to do anything as drastic as that to make positive changes to your score. Check out these five tips to boost your credit. If you make them a habit, you may see your score improve.
1. Schedule Payment Notifications
Paying your bills on time is one of the most important ways you can manage your credit score. FICO, a popular credit scoring system, weights your payments history the heaviest when it calculates your score.
If you forget to pay bills regularly, you’ll lower your score. But if you make a point to consistently pay bills on time, you may improve your credit.
The only problem? You lead a busy life running a household and going to work. It’s easy to forget about a few bills here and there.
If you have trouble keeping to a regular payment schedule, follow these reminders:
- Make an entry in your phone’s calendar for each bill a couple of days before it’s due
- Opt-in for online emails or text messages from your bank and utility providers
- Automate your bill payments, so your bank makes payments from your account on the due date
2. Hack Away at Lingering Debt
The next biggest factor in your credit score is your debt owed. How much debt you have contributes heavily to your overall score.
If you have outstanding loans, credit cards, or lines of credit, your priority should be to lower what you owe in these accounts.
This delivers a one-two punch to your finances. Not only will this help improve your credit score, but it will also help lower what you end up paying in interest and fees.
Like a lot of financial advice, this is easier said than done. But it’s still doable if you’re willing to put in the work.
A budget is one of the most effective tools when it comes to tackling outstanding debt. It helps you track your incoming and outgoing cash, so you can see how you spend your money.
Chances are, you won’t like what you see. Most people have some guilty pleasures that end up wasting a lot of their cash — whether it’s the infamous avocado toast or something more unique.
Spend some time pouring over your finances to catch your bad spending habits. You want to reduce your monthly expenses any way you can to free up more cash to put towards your debt.
3. Open an Online Line of Credit
Credit is a tricky issue for the underbanked. If you’re underbanked, you may not have access to credit products available from the biggest banks.
Deemed ineligible by these banks, you’re often borrowing from lenders that won’t report your payment history to credit bureaus — even if you pay your bills on time. But without this reporting, your credit score might suffer.
If you’ve been denied a traditional loan that reports to credit agencies, you aren’t stuck using products that won’t improve your score. There are alternatives like online lines of credit that build your credit.
Online lines of credit are simple, convenient ways to tap into credit — just like any other option you’d find with a traditional bank. However, unlike most traditional loans, options like a CreditFresh Line of Credit by CBW Bank are available to people even if their score is subprime.
More importantly, online lines of credit will impact your credit score. If you make a point of paying your line of credit on time, you’ll create a positive payment history as long you’re keeping up with your other bills
4. Don’t Shut Down Accounts
If you’re shouldering bad credit, all you want to do is sweep your past mistakes under the rug and cancel everything.
While this may feel like a good idea, you may be in for a nasty surprise if you commit to it. Closing too many accounts all at once could increase your credit utilization ratio.
Your credit utilization is how much credit you’ve used compared to the total credit available under your name. You want to keep it around 30 percent or less, otherwise it could hurt your credit score.
In terms of individual accounts, it looks like this:
If you have an account worth $10,000, and you’ve used $3,000, your credit utilization is 30 percent.
This same principle applies to all your accounts as well.
By closing an account, you’ll lower your total available limit. If you have high balances in other accounts, this will increase your ratio and potentially lower your score.
5. Check Your Credit Score Often
Keeping tabs on your credit score is a good habit to get into. You’ll be able to track good behavior and see your actions have an impact on your score. It feels good knowing you’ve made a difference!
Checking your credit report will also help you catch any errors that might impact your score negatively.
Fraud and mistakes made by the agency can undo all the hard work you’ve done to improve your score.
You’re entitled to a free credit check from each of the biggest credit agencies, so review your score often.
If something doesn’t look right, you’ll be able to fix any errors. If everything is as it should be, you can see the fruits of your labors.
Positive Habits Make Positive Change
When you have bad credit hanging over you, it can feel like you’ll never get rid of it. But a credit score isn’t a permanent thing — it’s constantly fluctuating according to the way you use it.
That’s a good thing. It means even the lowest scores have the chance to turn around. Set the intention to make positive change to your credit score. Start by following these tips and see how you can improve your score without entering a devil’s bargain.
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This post made possible by site supporter Mike John.
Photo by Matheus Ferrero on Unsplash