Your credit score, while only a three-digit number, plays a vital role in your ability to secure funds. The greater your score, the better your chances of achieving the lowest interest rates on a home mortgage, an auto loan, and credit cards. Unfortunately, when you have poor credit, it can make it difficult to borrow money from most lenders. Thankfully, if you currently have a low score, you can improve it.
Reduce the Amount of Money Owed Out
Credit Utilization is a tool used to comprise your credit score. In fact, the debt-to-income ratio accounts for nearly a third of the final number. Owing out large sums of money in multiple places creates enormous amounts of stress and consumes a good portion of your expendable cash. As a rule, use less than half, and try to keep credit cards at a third of their available balance. If your debt also includes a couple of car loans and school loans, applying for a consolidation loan through a lender like Old Dominion Associates will leave you with one, lower monthly payment, and zero balances on other sources of credit. If you’re short on time and need to raise your score by a few points, apply for an increase on a loan or credit card to offset the debt-to-income ratio.
Pay Bills By the Due Date
Each time you make a late payment it leaves a negative impact on your credit score. You can work for years, paying bills on time, and fall into difficult financial times, and your once stellar score drops a little more until you have a poor credit rating. Fair or not, that’s how the system works. The good news is you can start fresh by remaining committed to paying bills on time. The process is slow, however, if the period of lateness is limited to a small time frame, you can explain it to a lender when applying for a loan.
Why Having a Budget Matters
In order for a budget to work for you, your net monthly income needs to be greater than your expenses. While simple enough to follow, many people who don’t use a budget end up spending far more than what they bring in, causing them to push payments off to a later date, resulting in unnecessary fees and a lower credit score. The purpose of a household budget is to live life within your means and set financial goals. A budget brings an awareness of the amount of money you owe and to whom, allowing you to change poor spending habits. As the months pass, the amount of credit you owe diminishes, you make payments on time and you have the funds in place for an emergency.
Open a New Credit Card
If your credit score is low due to a lack of credit, apply for a secured credit card. The available balance will be low, around $300.00 or so, and you may have to pay a security deposit. However, if you pay the balance in full each month, in a year or less you’ll see your credit score moving up closer to the number lenders prefer. Opening a new card can also benefit people with established credit in good standing. If your only problem is a high debt-to-income ratio, applying for a new card can help.
Every time someone pulls your credit report, it affects your credit score. While it has a minimal effect on the number for a short period of time, hard inquiries done in large amounts can put you at a greater risk of not getting approval for credit cards or personal loans. One way to avoid it is to conduct thorough research on companies and then only apply to those that benefit you.
Your credit score can affect every aspect of your life. Thankfully, if it’s not at the number you desire, there are ways to improve it.