Having healthy credit is important for many reasons. Poor credit history can hurt you when renting an apartment, buying a home, purchasing a car, and even applying for jobs.
If polishing up your credit score is one of your primary New Year’s Resolutions, we want to help. It all starts by making the choice to buckle down and then taking one step at a time to complete the slow – but necessary! – process of improving your rating. Use these tips with a bit of diligence and focus to help achieve a healthy credit score before the year’s end.
1) Obtain Your Credit Report
Rather than guessing about your credit score, find out exactly what it is so you can determine your starting point. As part of your new budget for the new year, make a list of how much debt you have and all the creditors you owe. Too often, we simply make multiple minimum payments each month just to keep creditors from harassing us. Unfortunately, if you don’t actually track the nature of your debt, this can lead to confusion, as we don’t really know where we’re at, or what we owe.
2) Schedule On-Time Payments
Bad credit can be caused by making late payments, so the first step in improving your credit is simply paying on time. Put a reminder in your calendar – whether a digital one on your smartphone or physical one on a wall – of when your payments are due. Even better, put the date a few days before the actual due date so you don’t risk paying past midnight.
3) Eliminate Debt
Get out from under your debt by trying to pay off your credit cards as soon as possible – especially cards with high interest rates. If you have multiple cards, focus on the one with the highest interest rate first, and funnel as much money as possible into paying off that particular card until it’s at a zero balance.
4) Pay More Than the Minimum
To speed up debt elimination, it’s important to pay more than the minimum amount due. Seriously – anything helps. These little increases to your payments will add up over time, and as your lump sum average begins to dwindle, so too does the interest you are being charged on your balance.
5) Don’t Close Cards
The notion that closing our paid-off credit cads will help your credit score isn’t true. Keep the credit cards you have paid off, but just don’t put anything new on them until the rest of your debt is under control.
6) No More Credit
Resist temptation and don’t open any more lines of credit. More credit means the potential for more debt, missing payments, and other factors that can lead to a worse credit score.
7) Carry Cash
Get in the habit of having cash on you to pay for small items. This reduces the temptation to slap it down on a credit card. Break the cycle of credit dependency, and your score will improve slowly.
8) Be Consistent
Your low credit rating didn’t happen overnight, and bettering your credit score won’t happen overnight, either. Just be a responsible consumer, and stay on top of your payments by making them on time, and paying more than the minimum due. Slowly and steadily, you will raise your score. Breathe and stay committed. You’ll get there.