Got bad credit? Below are 8 solid tips that can help you build and increase your credit score. Be diligent, intentional and wise!
1) NEVER miss a payment on anything
I was hoping this would go without saying, but one of the best and perhaps most obvious ways to increase your credit score is to always pay on time (and pay in full). Most people can do this, but you’d be surprised at the number of people who are late or miss payments.
2) Pay credit card balance off before the statement hits
Your credit score factors in the amount you owe and your credit limit. This is a little trick that only few know… As you’re spending throughout the month, pay some or all of your balance off (if possible) before it rolls into your statement balance.
Your statement balance is then much lower than it would be otherwise, thus reducing the amount you owe and increasing your available credit. Ultimately boosting your credit score. Then, of course, pay the statement in FULL.
3) Don’t apply for too many things over a short period of time
Why? Hard Inquiries. That’s why. Whenever you apply for a credit card or small loan or anything, your credit will be hit with a hard inquiry. This makes you look like a higher-risk customer – short on cash or attempting to rack up debt… this will decrease your credit score.
4) Depending upon the debt, pay more than what’s required & 5) Wipe out the highest interest rate debt first
All debt isn’t created equal. As you know, some debt multiplies faster than others. Like credit card debt vs. an auto loan. If you want to get out of debt faster or kill some bad debt, you should consider killing your highest interest rate debt first.
This will obviously decrease what you owe, but will also save you money in the long run.
6) If you have a low rate continue making on-time payments
If you have debt with a low interest rate like 0-2%, don’t bother getting rid of it just yet. Making consistent payments will help you on 2 fronts: 1 your credit history age and 2 your consistent, on-time payments.
7) Ask your credit card company for an increase in credit limit
If you have had a credit card for a while and have managed it well, you might want to consider asking for a credit limit increase. Most card issuers, like Capital One, you can do it right in their app by just plugging in your information (especially if your income has increased).
This of course increases your score because of the amount you are capable of borrowing.
8) Although you might not use an old credit card, keep the account open
The # of open accounts, believe it or not, positively affects your credit score. If you have a credit card you never use, good, cut it up and don’t use it… or just don’t use it. That credit limit you’re not utilizing is positively affecting your credit score. Targeting less than 20% as the ratio between your total credit card debt and your total credit card available limit is general considered good. However, the lower you go the better!
If you are in a lot of debt and seriously feel overwhelmed, it would be wise to get help and seek personal council. For a great, proven plan to get out of debt, I highly recommend The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness by Dave Ramsey.
I know Credit and Ramsey have a hard time being in the same sentence, but if you can be disciplined and wise with your money, executing on good financial habits, including credit, there are benefits that exist.
I hope these 8 tips find you well and in better credit! The better your credit the lower your rate!
Cheers & God Bless!
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