Credit score – even reading it might make you nervous. So many people have come into our branches asking about this mystery. What does it mean? How do I start it? How do I fix it? Before we give you some tips on how to boost your credit score, let’s explain what we are talking about.
- What is a credit report? It’s a report card of your history of paying bills and credit habits over a period of time. We like to compare it to homework.
- What is a credit score? It’s a “grade” given to you based on your history of paying bills and credit habits. It interprets how well you have done on “homework.” The higher the credit score, the better.
- What does it say about me? Lenders, insurance companies, employers, etc., look at your credit as a way to determine your trustworthiness. If your credit is high, you are more likely to get approved for a loan at a great rate, or maybe you won’t have to put a down payment on your new cell phone plan.
Now that you have a general idea of what we are talking about, here are some tips on how to boost that “grade” you are given based on your credit report.
- Pay your bills on time! – This accounts for approximately 35% of your score.
- Try to pay off your debt quickly, and keep your revolving debt below 30% of the available loan. Approximately 30% of your score is based on how much you owe to creditors.
- Get in the game – The length of your credit history contributes 15% of your score. If you decide you want to build credit, starting the process sooner is better.
- Have a healthy mix – The types of credit you have contribute to 10% of your score. Do you only have credit cards on your report? That appears as a red flag to lenders.
- Pay more than the minimum balance and do it early – This helps you pay down debt faster and reduces the amount of interest you will pay later.
What other tips and tricks do you know of to keep your credit score up? Share them in the comments below.
PS – Click here to check your credit report and learn more about credit reports and scores.
There are several different approaches to pay off debt, and to say one is the best isn’t really fair or accurate. You need to choose a method that works best for you. The difficult part is designing your plan and sticking to it. That’s why we want to showcase an easy method that seems to work well for most people. Have you heard of the Snowball Method to pay down debt? Click here to read all about it. This method is a great way to pay down your debt because: 1. The process is laid out – you just need to fill in the blanks. 2. It is designed to help you see progress quickly, which keeps you motivated to keep going!
Here are some other great ways to pay down debt:
- STOP spending money on your credit card. Some people will go as far as to freeze their cards in a container of water. This forces them to wait out their impulsive decision, which often changes by the time the water thaws.
- If you have credit card debt with interest, start looking for lower or 0% APR balance transfer deals.
- Put all money from work raises or bonuses towards paying down your debt.
- Sell unwanted or unused items in your home. From clothing to furniture, there is likely something you have that someone else wants. Alternatively, sell items you receive for birthdays or holidays that you know you won’t use.
- “Fast” one of your more expensive luxury items for a period of time (a week or a month) and use the money you would have spent to pay down debt. For example: $5 McDonald’s breakfast x 5 days per week = $25 a week or $100 for the month.
- Change your expensive habits and reroute the money to pay down debt. For example: Smoking a pack of cigarettes at $6 per day is $2,190 per year.
Paying off debt isn’t easy. If it was, most of America wouldn’t be in debt. However, it isn’t the act of paying off debt that is hard, it’s changing our habits and committing to those changes. Are you willing to commit? Tell us about your journey to become debt-free below in the comment section. What is working for you? What are your challenges?