Personal finance is on just about everyone’s mind these days. For good reason, too. With gas prices hitting historic highs and the economy experiencing recession-level inflation rates, everyone’s budget is a little bit tighter, and no one’s money goes quite as far. Acquiring a credit card, or securing a personal loan can be great ways for people to ease a little financial hardship, but they typically require a relatively solid credit score. Even buying a car or a house takes a strong credit record. If you don’t have any credit history at all, or you have low credit, it can be extremely difficult to build wealth, especially in these trying times.
There are ways to build up your credit, though, and tactics that can help you repair bad credit, too. By putting in the time and dedicating the effort to tackling your poor credit score, you can see your financial situation do a total 180. Nothing easy happens overnight, but if you build healthy money habits now, and keep at them, the sky’s the limit for both your potential and your credit score.
Paying Bills on Time
This may sound like a no-brainer, but paying your bills on time month after month will go miles in helping you repair a bad credit score. Paying bills on time is important because it shows the various credit bureaus that you’re not defaulting on regular payments. Not only that but it is extraordinarily important to make your credit card payments on time as well. This is because outstanding credit card payments have an increased likelihood of attracting higher levels of interest or being sent to collections. Neither situation is good.
If an account is sent to collections, the user will be responsible for the entire amount in full, rather than incremental monthly payments. This can put a huge weight on the shoulders of a modern consumer, and can actually be crushing. If collections are avoided, excessively late credit-card payments are also subject to extreme interest rates that drive the price of the debt up way higher.
Taking all of this into consideration highlights why it’s essential to make credit card payments on time each and every month. Not only that but driving down your credit usage is another great strategy that can improve your credit score.
Decreasing Credit Usage
There are many lines of credit that people don’t necessarily even consider when they’re thinking about their credit score. Car loans, personal loans, student loans, and credit cards are all lines of credit. Making payments for any of the above on time will help to reduce the total amount of outstanding credit in your name. However, consumers can do much more than just make the minimum payment month after month. When it comes to decreasing credit usage, users can benefit by driving down the amount of existing credit faster. This can be accomplished through payments that exceed the minimum balance. For instance, if a monthly credit card bill is $230, and a user chooses to pay off $500/month instead, they will be paying off more of the principal credit faster, giving the bank less credit on which they can charge interest.
This applies to all lines of credit regardless of where they’re coming from. The faster you’re able to pay off outstanding lines of credit, the faster you’ll see your credit score start to climb.
Tracking Your Credit Score
Tracking your credit score is another extremely important aspect in being able to improve it and see it climb. This is true whether you’re an individual or a business. While there are different business credit reporting services that exist in the enterprise world than there are for individuals, it’s important to track this information either way.
By tracking your credit score, you’ll have a good idea of where it is, and this can help you set realistic goals for where you want to bring it. Then, as you work toward meeting your goals, you’ll be able to see how much progress you’re making each and every month. This is both rewarding, and also can help keep you on track.
Getting Into Smart Money Management
Everyone can benefit from a quick refresher on smart money management. There is a balance between living frugally and enjoying the money that you make and living your life. It’s never too late to start building and maintaining smart money management habits, but the sooner you start, the better. This is because time is your friend when it comes to building wealth incrementally. The longer you’re able to let money compound on itself, the larger you’ll see your assets grow.
Putting away a little money every month, making sure to pay your bills on time, especially your credit card bills, and tracking your credit score every month will surely help you improve your credit score and start reaching your financial goals.
