How to start improving your credit score today
Few numbers have as big an impact on your life as your credit score. If you want to open a new credit card, buy a vehicle or take out a mortgage, the rating determined by credit companies will dictate whether or not you’re successful.
While living with a poor rating can feel debilitating, it is important to understand that there are a few simple ways to make a lasting change to your score. It may take time, but committing to improving your score is an excellent goal.
So take a moment now to explore some of these tips on how you can start changing your score right away. A few adjustments to your current financial practices might be able to make a world of difference.
Understand your rating
Before you can start fixing your rating, you need to understand how your exact score is calculated. Your credit is established the moment you open your first credit card or take out a loan. Credit companies look at how you use the funds you borrow, the frequency of credit usage, and the amount you pay back in a given period.
Additional factors also come into play like your personal information. Your income, for example, is a crucial piece of data that helps to dictate your exact score.
Make sure to protect yourself from any fraudulent activity as this may also affect your credit score. Be proactive and seek the assistance of companies which offer credit protection services.
While understanding how your score is determined can help you make changes, you also want to know where you can go to access and decipher your full report. Your credit score can be obtained from several sources, but a report from each credit bureau can only be accessed once per year.
There are also other resources that may prove advantageous for your journey. A credit management report card can help give you a better idea of the progress you have made.
Pay your bills promptly
One of the biggest factors that cause your credit score to lower is the way you handle bill payments. When you are not paying your bills in a timely manner, it has a negative effect.
So one of the easiest ways to start making your score a little bit better is by paying your bills when they are due. The longer a particular payment is late with a utility bill or loan, the more of an impact it has on your rating. Luckily, there are some easy ways to make sure you pay your bills in a prompt manner.
The internet has made it easier than ever to pay bills on time. All you need to do is set up automatic payments. Almost all major lenders and billing organizations offer this option to customers. The beauty of having your funds debited from your account is that you can set the payment for a date that works with the way you receive your paychecks.
Sensibly arranging the payments in a staggered way throughout the month provides you with a clear idea of your budget and a credit score that is on the mend.
Pay off as much debt as you can
Another problem that you may be facing when you have a low credit score is debt. The major credit bureaus assess your available credit each year and weigh it out against data related to your income and debt.
When it is determined that you have more debt than can be paid off in a sensible amount of time at the rate your income moves, then you are going to be looking at a lower score. To start seeing an improved rating, you absolutely need to dedicate time and energy to creating a plan for paying off your debt.
Debt can be very easy to fall into and incredibly difficult to hoist yourself out of. Many consumers pay far lower than they should be on their monthly bills. When you are making the minimum payment requirement, you are paying off very little of the balance itself. A majority of the payment goes toward the interest, which continues to accrue the longer a balance is outstanding.
To make a significant change to your debt, you need to start making considerably larger payments whenever possible and start to really hammer away at the sum total of what you owe.
Restrict your spending
Access to credit can be dangerous for some people. When you have a credit card with a decent limit, you might feel tempted to splurge more often than you would normally.
Unfortunately, this is exactly how debt issues begin. So before you make any major purchases with a credit card, give yourself time to think about the future and the reality of whether or not you can pay the item off in a practical amount of time. Taking this extra step can make a world of difference to your success.
Whenever you feel tempted to use your card, take a moment to think about how long it will take to completely pay off the investment. Look at how much money you make in a year and see what the item will cost you with interest over the next few months.
If you are not able to pay the item back in a short window, then it might not be the best use of your funds. By limiting your spending to emergencies and special situations, you are much more likely to gain a bit of control over your debt.
Find the right path
A bad credit score is not the end of the world. Give yourself time to find the right path to a better rating and see what it can do for your future.
Photo by MD Duran