Are you fed up with your low credit score, but not sure what to do about it? If you’re feeling frustrated with finances, try this two-pronged approach to boost your credit score and improve your financial strength. Let’s make some smart moves by going to credit school, and going old school.
- Be diligent
- Get authorized
- Pay down your balances
- Apply for increases
- Keep cards available
- Dispute errors
- Pay with cash
- Make a budget
Think about paying your bills with the same diligence as turning in a report on time in school. If possible, do what smart students do — pay on time or even a little early. You’ll reduce your stress, and creditors will take notice. As much as 35% of your credit score depends on your payment.
Do you have a low credit score? If you have a 620 credit score or lower, you may want to ask your parents to help you build your credit. If your mom, dad, or a loved one is willing to help you out, they can help you establish credit by adding you in as an authorized user on their account. Be extremely diligent about paying on time, as this will strengthen your credit score, and affirm that your loved ones made the right choice by helping you out.
It kind of seems like a “no-brainer”, but as much as possible pay down your balances. Look at all your open accounts and make a consistent effort to reduce balances. As you do this, be sure to not put more on credit.
This move takes courage and restraint. As you pay down your balances, apply for credit increases. You’re not doing this to go out and pay other bills or take a round-the-world trip. You’re doing this to improve what’s called your credit utilization. This is the ratio between how much you have available compared to how much available credit you’re using. Financial experts advise that your ‘utilization rate’ should be around 30%.
As you’re developing courage, restraint, and higher available credit without higher usage… resist the urge to close your credit card accounts. Credit card companies use open accounts in calculating your credit card utilization. If you don’t understand how this works, don’t worry. Just don’t use those cards and don’t close the account either.
While you’re “going to credit school”, take the time to review your reports. It may not be on your dream list for the weekend, but it’s important to make sure that the reports are correct. Mistakes can damage your credit score. Check regularly to make sure that all the history and data are accurate and current. Now, let’s look at three “old school” methods to boost your financial strength.
There’s just nothing like cash to make you feel in touch with how much you have, how much you’re spending, and what you need to do differently. Cash is something that you can touch and feel. Many financial experts recommend going to an all-cash basis when working on financial strength. You won’t be operating in the dark or buying things you can’t afford. Plus, it’s glaringly obvious when you can afford something. You either have the cash in your pocket—or you don’t.
Being disciplined about money often begins with making a budget. How much are you spending and where are you spending it? Think of two main buckets: fixed expenses and optional expenses. As you make a budget, you’re likely to see that some of the things you believed were “fixed” are optional. What kinds of things? A daily coffee habit at the local coffee shop. A weekly drinking spree. A must-have sparkly sweater. Make a budget and you’ll start making more values-driven choices.
Make Being Frugal a Way of Life
Being frugal can be a great way to live your values. You’re paying cash, tracking spending, and choosing to enjoy the best things life offers. This often leads to healthier habits such as cooking delicious vegan meals, playing music, dancing, and meeting up with friends for a hike.
If you’re making being frugal a way of life, you’ll make new friends, develop healthy habits, and save money at the same time.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.