To begin, let’s look at what the word “credit” means. Credit is defined as “the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.” That stated, credit is based on trust and the ability of a given person to follow through on their promise to repay debt. Debt is something we all accrue throughout our lives and it directly impacts our credit health and worthiness. Together, let’s explore some ways you can improve your credit score.
- Clean up your credit report. A credit report laden with inaccurate information can cost you interest points on each loan you get. This will cost you thousands over your lifetime, which is why it’s so important to manage and maintain. To get started, request copies of your credit report from places like Experian, TransUnion or Equifax. You may also be able to obtain one from your financial institution. Once you have it, review it and be sure everything is accurate. If not, be sure to address those issues in a timely manner.
- Pay down your balances. This seems like common sense, but what this is speaking to is better money management. Try not to use your credit cards unless you have to. Many consumers get caught with one balance for years on end, which costs them thousands in interest. This happens over time as new charges are made coupled with minimum payments creating revolving debt. Eat in a little more, save where you can and it will pay off big when you need it most.
- Submit payments twice a month. This is difficult but very worthwhile. Create a challenge for yourself to not spend everything you bring in, then send a little more to your creditor. It’s not easy, but it’s proven to increase your credit score as well as decrease your debt. It’s truly a win-win!
- Request a credit limit increase. This method might work for you, but be careful. Often consumers see their increased limit as money they can spend, which only increases your debt. Should you increase your limit, our advice is – turn a blind eye to it. Continue paying down your debts and living within your means and ability.
- Open a new account. It’s easy enough to open a new account at a bank or even with a mobile phone provider. Aside from the benefits that these businesses offer, simply having an open and active account with them adds to your creditworthiness. However, be sure you stay focused on why you opened the account. If your strategy is to increase your credit score, stick to it.
- Negotiate balances that are outstanding. Some financial institutions will allow it’s customers to negotiate or settle on debt. These conversations are never easy, but may save you thousands in the long term. Paying back what you borrow is still the best option.
- Pay your bills on time or early. This proves to be difficult for a lot of consumers for one reason or another. However, the money you earn is coming in and ultimately – going out. Utilities, groceries, car payments and healthcare add up, we know. Take the time to make a spreadsheet of your recurring expenses, and pay your bills as soon as you get your paycheck. This will ensure your bills get paid on time and help improve your credit health and score.
Now that you know how to gain control of your credit and improve it, what steps will you take to move forward? Hopefully, all of them. Creating a simple spreadsheet in Google, accessible by setting up a free Gmail account, can bring visibility and clarity to your financial well being. Month to month, enter your bills and set out a budget to live within, and you’ll be on your way before you know it. It only takes a few minutes and can potentially save you thousands.