Some people who have checked their credit once or twice and found that it is relatively low may become disheartened and stop checking it or give up on the possibility of raising it. Establishing good credit is important. However, being conscientious about your credit can raise your score over time. Avoiding certain spending habits that can hurt your score and being disciplined about monitoring your credit can set you on course for a credit comeback and boost your credit score.
Make a Monthly Budget
Creating a budget will help prevent you from going over your credit spending goals and carrying too much of a balance forward to the next month. Tabulate your biggest monthly expenses such as housing, utilities, transportation, and medical expenses. Approximate spending on items such as food and household necessities. When you have the biggest line items in your monthly budget identified and calculated to arrive at your overall spending limitations, you can determine how much you should be trying to save each month as well as how much you can spend on things that aren’t essential such as entertainment or dining out. You can use a budgeting app to track your spending and ensure that you’re hitting your goals.
Don’t Carry a High Credit Balance
Over-utilization of individual lines of credit can lower your credit score significantly. When you spend more than 30% of your credit limit in a billing cycle, it can bring your score down between ten and twenty points. Try to avoid carrying a high balance on your credit card or making only the minimum monthly payment. In addition to lowering your score, using too much credit can subject you to considerable responsibility for interest rather than just the underlying balance. Pay as much of your bill as soon as you can to prevent a lot of interest from accruing. You’ll be able to spend less money on interest and put it towards new purchases.
Increase Your Credit Limit
One of the best techniques on how to improve credit score numbers is to raise your credit limit on existing lines of credit. If you have a credit card with your banking institution and you’ve been making payments consistently, it may be possible to increase your credit limit without subjecting yourself to higher interest rates. Instead of using the higher limit to spend more each month, you’ll be decreasing your credit utilization ratio and thereby helping out to boost your credit score.
Check Your Credit Regularly
Monitoring your credit will help you identify and understand how your spending habits are affecting your credit. You’ll be able to see how many points your score lowers when you spend a high volume of your available credit or when there are hard inquiries on your credit report. In addition, you can learn about any fraudulent activity or mistakes on your credit report soon after they occur and take immediate corrective action.
Don’t Let Mistakes Sit on Your Report
If something on your credit report is inaccurate, you should dispute it rather than let it sit there and wait for it to age off of your report. File a claim with each of the credit reporting companies or work with a credit monitoring service that can help you make a claim with each of them. You can also get in touch with the company who reported the error to request a copy of its information and petition it for a correction.
Avoid Default Status on Loans
Every type of loan counts as a line of credit on your consumer credit report, including federal student loans. If you have any loans such as personal or student loans, missing consecutive payments can cause the status of the loans to show as defaulted or delinquent on your credit report. If you’re unable to meet your monthly payments, get in touch with the lender to see if you restructure your payment plan. You may be able to change your monthly payment amount. Alternatively, you may be able to get a temporary deferral based on economic hardship. While interest may still accrue on the amount that you owe, your account won’t show as being in default and it won’t be forwarded to collections.
Prioritize Paying Off Debt That Has Been Forwarded to Collections
Collections activity can have a big impact on your credit score. If you have been ignoring collections letters that come from a service provider who you no longer use such as a former utility or cell phone service provider, work towards paying off the balance owed so you can clear the items from your credit report.
Avoid Opening Too Many Credit Cards
While some introductory interest rate offers of business credit cards may seem awfully tempting, you have to consider that there may be negative consequences of opening too many lines of credit. In addition, excessively generous offers for new cardholders may be a distraction or camouflage to consumers about drawbacks such as high interest rates or lofty annual fees. In effect, the fees may far outweigh the value of the introductory offer. Make sure that you thoroughly understand all of the hidden fees associated with a particular credit card before you jump at the introductory offer.
Opt-In For Credit Reporting When You Can
There are a lot of monthly expenses that you prioritize paying right away but aren’t reflected on your credit report. In recent years, however, many new opportunities have emerged to include these items on a report to help people start building credit. Rent and utilities, for example, are often among the first bills that people pay every month. Your landlord or utility provider may give you the option to have them reported as a positive line item on your credit report.
Raising your credit score takes conscientious planning and careful spending. Create a structured plan about how you can boost your credit and stick with it. A strong credit score can help you qualify for better interest rates, financing on large purchases, or a new apartment. Ultimately, strong credit is an important building block of good financial management.