Whether you’re building your credit score for the first time, trying to maintain or repairing it, there are multiple routes you can take. Though a couple of bad marks such as missed payments and a high income-to-debt ratio can hurt in the long run there are daily actions you can take to build your credit and improve your score over time. Having a good credit score can affect how much you pay for your insurance policy.
Be Diligent With Payments
Late payments are a giant waste of your money and time. It will always hurt your credit score when reported and they make life hard for your lenders. Carefully review each invoice as it comes in and note the due date. If you can’t schedule the payment right now, set a calendar popup on your phone or make a note on your wall calendar a week before the due date to remind you to get the payment either mailed or scheduled.
As a last resort, if you have a computer where you regularly pay your bills, park unpaid bills right beside it so you don’t forget to schedule them. Ideally, you should set up for auto-payments so that you always pay on time without having to remember when something is due. Some vendors even offer discounts if you set up your bank account to pay automatically on a set date, saving you time and money.
Schedule Payments Carefully
Unless you have your checking account tied to an emergency savings account, don’t schedule any payments on accounts that don’t have the money in them right now. Otherwise, you will risk having both a late payment fee and a bank overdraft fee. Try to build a cushion in your checking account to help you stay ahead of due dates.
If possible, note the balance in your checking account before you do your necessary shopping, use your credit card to cover the debt, then go home and schedule the payment immediately. If you have trouble getting approved for a new credit card, searching at local banks and credit unions might help. For instance, if you live in Omaha, a quick search for “Omaha credit card” will yield a variety of options to choose from.
Ultimately, if you’re regularly late with payments, this practice can help you break that habit. Plus, you get the credit boost of paying off the account!
Borrowing From Peter to Pay Paul
Paying one debt with another can be a sign that you’re headed for financial trouble. However, you can reduce your credit utilization rate by spreading one big credit card debt over several cards. Your credit utilization rate is the amount you owe vs. the top limit on the card. If you can keep your utilization rate under 10%, you can help your credit score grow. Transferring debt to a 0% APR card can help reduce the interest you pay; just be sure to put away the previously used cards to avoid adding debt.
Look For Private Funds
A loan from your parents or a friend will not show up on your credit report. With these funds, you can reduce credit card debt or take care of a bill that’s at risk of going to collections. Depending on the relationship you have with the person, this debt can be a comfort or a hindrance. When you borrow from friends or family, there are several steps you can take to make sure they are paid first.
- Pick up a side hustle and dedicate all of those funds to this debt.
- If you have an automatic deposit, see if you can route part of your regular check directly to them.
- Make a personal visit to them with cash after every payday.
If you’re at risk of destroying a relationship or letting a debt go to collections, the collections folks will be easier on your heart. Borrow with care when asking those you love for money. Without paying for interest, you are able to.
Apply For a Personal Loan
Applying for a personal loan can help you bring your credit by showing consistent payments over time. For this strategy, you would take out a loan for an amount you already have in your checking or savings account and set the loan on auto-payment. This way, you build credit without having to worry about the payments. This method is especially helpful in a situation where you might want to move forward with a large purchase that you already have the money for without having to empty your account. If an emergency arises, you have the funds to manage worry-free.
But be careful, check the balance, and the current interest rate to make sure you’re not paying more in interests than its worth. One of the benefits of a larger personal is that it’s only one credit product. Rather than rolling several credit card balances onto other cards, you can reduce hard inquiries against your creditworthiness by taking out one personal loan.
Having low credit isn’t the end of the world, but it can make life difficult when you are trying to make large purchases. With low credit, you may struggle to get a mortgage or a car loan when you need one. Bouncing too many checks may mean you face criminal charges. Good credit is often a function of habit. There are many ways to raise your credit score by building a strong payment history and credit utilization strategy that will help push your numbers up over time.