Whether you’re an everyday shopper or like to splurge on luxury purchases, practicing restraint once you’ve received your first line of credit can be difficult.
These five quick healthy credit tips may help you resist the temptation to use your entire credit limit and improve your credit score at the same time.
Create a Budget & Stick to It
A budget isn’t a one-size-fits-all option. It’s important to personalize your budget based on your lifestyle and priorities. Luckily, there are tools to help you decide what to account for in your budget and how much to dedicate to each category. If you’re almost to your spending limit, reconsider the purchase. Likely, it can wait until you have the cash on hand.
Sometimes, it’s easy to forget or lose track of what you charge on a card and how that monthly payment will impact your overall financial overview. Try an assisted app, money management portal, or website to help you keep track of your budget and spending on all personal accounts and lines of credit you have available.
Meet With a Credit Counselor
If you feel weighed down by debt and monthly payments, getting credit counseling could be the fresh perspective you need to see your situation clearly. You can learn important strategies for managing debt, explore your options for repaying existing loans, and receive confidential advice that’s custom-tailored to your financial situation. Even better, showing proof that you’ve been to credit counseling can help a lender overlook a complicated credit history.
Picking a credit counselor, though, is a hard decision. There are many to choose from, and some people masquerade as credit counselors but are really crooks seeking to steal your money or identity. The first step would be to schedule an appointment with a service specialist at your financial institution to review your credit report. This will help you examine ways to pay down or eliminate debt and unnecessary expenses before sorting through credit counselors to find a legitimate match.
Consider a Personal Loan
If the credit card spending has gotten out of control and you find yourself paying more on interest each month than your owed balance, you may consider a personal loan to consolidate that debt.
Personal loans may help you lower your credit utilization ratio and slowly improve your credit score. A credit utilization ratio is the current revolving credit balance owed on a person’s credit report divided by the total revolving credit available.
The interest rate on the personal loan will ideally be lower than what you would have been paying on credit card balances. Calculate the rate or talk with your financial institution if you’re unsure of the best route for you.
Report Your Rent
Make sure your rent payments are tracked and reported to Experian RentBureau, the only major credit reporting agency to include on-time rental payment data on its reports. The use of timely rent payments to build and boost credit scores is relatively new, and many people don’t know about it yet.
Some services will report your rental payments to all three major credit bureaus like PayYourRent and RentTrack. Signing up for Experian Boost lets you add phone and utility bills to your Experian report.
If you’re already leasing a home or looking to find a suitable property to lease, ask your management company if your payments are reported to Experian RentBureau. And if you pay rent to an individual rather than a management company, you can still take advantage of a service that collects your rent payments electronically, pays your landlord and reports to Experian. It may be possible to include your excellent rent payment history, too.
Every agency makes mistakes, and you may have one on your report that’s bringing your score down. Follow this step-by-step guide to dispute any errors found with the credit agency that has listed them.
Avoid Opening New Credit Often
Every new credit card you apply for means another time your credit history gets pulled. Lots of “hard checks” can negatively affect your score. It may hurt your chances of approval and/or increase your approved rate.
Similarly, opening more unsecured cards with revolving credit will lower your credit variety, because you will suddenly have a much heavier amount of unsecured credit lines and less of other types of borrowings.
While once considered a positive attribute across all credit scoring companies, the recent modifications to the VantageScore have changed all that. Lots of open credit will now negatively affect your VantageScore.
Be confident that you need that line of credit and use it in your best interest. A good decision will likely bounce back in time but avoid digging a debt grave with a shopping spree.
Establishing or improving your credit can be a timely process but can be accomplished. Continue to learn more about how to improve your credit to achieve the financial goals of your dreams.
This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.