Credit is something that you don’t have to be afraid of. There are many ways that you can improve your score in less than a year. You might ask, why is credit so important? Credit is a number that represents your responsibility when it comes to managing your money and debt. A good score is very beneficial when it comes to lending. Having debt is normal and can be easy to manage so that your score doesn’t have to take a hit. Whether you have a low score or no score, just by keeping tabs on your spending and borrowing habits is a step in the right direction.
Most often than not, credit cards are the easiest thing to apply for that pulls your credit. However, as easy as that is, it doesn’t mean that applying for more than what you can handle is the best option. The most common habit people seem to get into is credit card debt which can really hurt your score. Whether you open too many credit cards, miss one or two payments, or make any late payments, you are doing damage to your credit score.
There are many tips and trick to increase your score. For starters, make sure you are making your payments on time and making at least the minimum payment. Sometimes it is helpful to input the due dates into a calendar, so you don’t forget about them. This will ensure that all your payments are on time. Another way to increase your score is being added as an authorized user. This essentially lets you take credit for someone else’s debt. Keep in mind that whoever is adding you as an authorized user is being responsible for making payments on time and is not abusing their credit cards. If the options above don’t apply to you, you can always apply for a credit builder card also known as a secured card.
A secured card allows you to build credit or establish credit. These cards have limits based on a deposit. What you put down as a deposit is what you set as the credit limit. As you use your card, your limit will decrease but when you pay off the card your limit goes back up. The easiest and fastest way to build on your credit through the secured card is by making your payments on time.
Another thing to keep in mind is that just because you have a credit limit doesn’t mean you should use all of it. For example, you may have a credit limit of $2,000. It is not a good practice to spend all that. You could use $1,950 but if you make a purchase not realizing it you could go over your credit limit, which can hurt your credit. It is good to get into the habit of using 10-30% of your credit limit. That is another reason why it is good to check all your accounts regularly. It is important that you monitor your credit score and accounts and make sure you are on the right track. By getting in the habit of regularly checking your score, you can correct any errors that could be there. It is nice to also see how much progress you are making.
If you don’t have any credit cards and you still want to build your score, applying these practices to your credit products can help you succeed as well. For instance, paying your car payments, loan payments, and even rent/mortgage payments on time are all important ways to maintain a good credit score. All these practices can help improve your score. A good score can present more opportunities for loans, a better interest rate and overall saving you money in the long run. Be alert and don’t be afraid to ask questions with your financial institution.
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