You’ve heard many strive to lose weight for their resolutions, others maybe get a grasp on their finances, while something that may be on the radar but doesn’t make it any less important, is working on raising your credit score. No matter if it’s already “good”, or have had trouble in the past, there is almost room for improvement, because if you think about it, the better score you have the better interest rate you can get, which means that monthly payments on mortgages, loans, and credit card interest will be lower. With that extra money you can read about sep ira rules, so maybe this year instead of trying to lose a few pounds you can focus on improving your credit score.
Check Your Report
First off, if you haven’t looked at your credit report in a while, or these days, it’s been over a year, then now is the time to get a free copy of your report from any of the major credit bureaus. Here you can review for accuracy and make sure that all accounts are correct and up to date, just keep in mind it can take a month or two to catch up with the report. Your credit score will be missing on there, but now credit card statements are providing your score so you can see month over month to make sure you’re trending in the right direction.
Every Payment On-Time
Payment history is a huge piece of your credit score so it’s important that your payments are made on time. While sure, missing a day will not send a hit to your credit report, but that may cause a late fee and a spike in interest rate, but it’s when you hit thirty days late is when it will negatively impact your credit score and by that little mistake could take as long as seven years to come off your report, so do everything in your power to pay on-time, maybe even earlier to be sure.
Pay Down Debt
Just as important as payment history comes the amount of credit utilization you have. This takes the total balances versus the available credit you have, not one card, but your overall balances and credit limits, and the closer you are to maxing out, the worse off your score is. If you can pay off debt not only will your credit score rise, but you will no longer be responsible for paying extra money away on interest and free extra money for more important areas such as building an emergency fund and putting more towards saving for the future,
For Extra Motivation, Start with the Small Balances
Depending the balances and number of debts you are paying off it can be overwhelming. By paying off the large balances it can seem like forever until it looks like any dent is going into the balance, leaving you frustrated like you are not making any improvement. Although it won’t help your score a ton, for motivation purposes, try paying off the smaller balances first. At least this way you can really see accounts start to show zero balance and may give you the extra motivation to continue on in your quest to eventually become debt free.
Keep Zero Balance Accounts Open
When you do finally get balances down to zero your first instinct may be to close the account so that you can avoid any temptation in charging up the card again. While that may be smart if you know your spending habits, closing accounts could actually hurt your credit score, as they are taking away from the overall credit availability that you have. If you are looking to avoid charging, try cutting up the cut so you can no longer use it but keep the account open at a zero balance. That way it will still be available to your credit score but you are not actually charging on it.
Use a Debt Consolidation Loan
Depending on the balances, number of accounts, and interest rates, sometimes just making monthly payments towards the balances are not enough and are hardly making an impact, so it may make sense to take out a loan for a set period of time that you can have the balances paid off. At least this way you can spread out the payments over long term but there will actually be an end in sight. Whether that is a personal loan or a credit card that may offer a promo for a 0% balance transfer, look to what may make sense for you in your hopes of getting out of debt and raising your credit score.