In today’s society it has become nearly impossible to live your life without using credit to make purchases. Mortgages, car loans, and student loans are all staples of life for the average person. Most people also use credit cards to purchase their everyday items. Due to this reliance on credit, having a good credit score has become extremely important so here are a few tips and tricks to build and maintain good credit.
Understanding Where You’re At
First things first, you need to get a copy of your credit report and assess your situation. Read over your credit report and check for errors like incorrect amounts owed or late payments that were actually on time. If you have these errors or any others you should get in contact with the credit bureau and dispute them.
Make Payments on Time
One of the biggest contributors to increasing your credit score is making your credit payments on time. In order to do this you can check with your bank to see if they can send out emails or text messages to remind you when payments are due. If your bank or other loan provider doesn’t provide reminders you can always set reminders on your phone or a physical calendar so you don’t forget.
You can also enable automatic payments on credit cards or other loans where the payment will automatically deduct the amount from your bank account. This is a less advisable option, however, because it doesn’t provide the money awareness or money management skills that come with doing it manually every month.
If You Fall Behind, Catch Up
If you fall behind on payments, do your best to get caught up with your current payments and not fall behind again. Slip-ups happen, but they don’t have to be the end. If you consistently make payments on time after catching up, you will eventually cause the impact of falling behind in the past to fade. Older payment history is overshadowed by how you are managing your credit today, so focus on the here and now to ensure you keep on track.
Pay Down Outstanding Debt
If you have outstanding debt on credit cards or have fallen behind on loan payments consistently, your credit score will suffer. Paying off or even just reducing these debts will improve your credit score significantly. Paying down debt will help fix bad credit faster than developing a cleaner payment history, but can often be more difficult. Therefore, you should reach out to a debt advisor for help and advice.
Use a Credit Card
Using a credit card responsibly is a good way to improve your credit score. If you have bad credit and can’t get normal credit cards to increase your credit score with, you have the option of using secured credit cards (credit cards where an asset is held as collateral), prepaid cards (you pay a balance before you can charge anything, and then you can charge that amount to the card), or unsecured cards (low balance limits and high interest rates) until your credit score is high enough to use normal credit cards again.
Only Use What You Need
Don’t open up several different credit cards just to have a variety of options, especially if you are a new user of credit. Having balances on several cards even if they are under $50 will have a negative impact on your credit score.
Try to use less than 30% of your credit card limit in order to keep companies from assuming you spend money like it grows on trees. If you are spending sparingly and are still over that 30% mark, ask the company for an increase in the credit card limit, but continue to spend the same amount.
Bill Rumping is the Debt Expert of Mid America Debt Relief. If you or someone else you know has an outstanding amount of debt contact Bill at (636) 223-5900 or bill@MidAmericaDebtRelief.com.