Four Credit Hacks for Repairing Your Credit
Home-ownership is an integral part of the American dream. To prepare for one of the most important financial decisions you’ll ever make, you’ll need to assess your financial situation, including your credit score. Your credit score is a number between 300-850 that’s assigned to you to indicate how likely you are to repay debt. A credit score of 700-749 is considered good, while a credit score over 749 is considered excellent. However, only 23% of Americans have excellent credit.
Your credit score is impacted by various factors, including how much debt you owe, if you make payments on time, and how long you’ve had credit. Lenders use credit scores to base interest rates on – a low credit score usually means a higher interest rate and a good credit score usually means a lower interest rate. Over the years of loan repayment, a good credit score resulting in a lower interest rate can save you thousands of dollars. If your credit score could use a boost, let’s take a look at four of the most effective ways to build and repair credit.
1. Create a Monthly Budget (And Stick to It!)
It’s hard to make lasting financial changes if you aren’t managing your day-to-day expenses. While some people associate budget with restriction, knowing exactly how much you’re spending and can afford, can feel more like financial freedom. Plus, part of improving your credit scores involves reducing debt. A monthly budget can help you lay a solid foundation for paying off debt faster. Visit www.everydollar.com for a free and easy to use budgeting tool. Download the Every Dollar app for easy budget tracking on the go!
2. Check Your Credit Report Thoroughly for Accuracy
Equifax, Experian, and TransUnion are the three major credit agencies that provide your credit reports. However, studies indicate that at least 1 in 5 people have an error in their credit reports. Luckily, as a consumer, you are entitled to a free copy of all three reports each year. Make sure you review your credit report at least once annually and report any discrepancies you find to the credit bureaus. Your credit report also helps you identify the specific issues that are lowering your score so you can tackle them systematically. You can receive your free credit reports by visiting annualcreditreport.com.
3. Pay On Time, Every Time
One of the easiest ways to improve your credit is to consistently pay your bills on time. Sounds simple but a recent study sponsored by Visa indicates that 46% of Americans will have at least one late payment in a 12-month period. On-time bill payment accounts for a whopping 35% of your credit score. Without consistent bill payment, it will be nearly impossible to move the needle on your credit score in a positive direction.
4. Use Credit Cards Wisely
Being responsible with a credit card can increase your credit score, but many people find themselves in over their heads with each swipe of their card. In fact, Americans owe an astounding $1.04 trillion in credit card debt. If you’re using credit cards, make sure you’re using the following credit building guidelines to your advantage.
– Keep your balances low! Maxing out your credit card to its spending limit is a common red flag for credit bureaus.
– Have the least number of cards possible. Open too many credit cards can lower your credit score.
– Beware of enticing credit card offers and rewards. While credit card companies try to sell you on additional rewards and points,
the costs for those benefits are absorbed into the bottom line, typically through interest rates. Remember, nothing is free when it
comes to credit cards.
Whether it’s buying a home or achieving financial peace of mind, don’t let bad credit hold you back. Creating and sticking to a budget, using credit cards wisely, and being aware of what’s in your credit report can help you boost your credit score and save you money. Start today to create a financial plan that will lead to a bright future.