Credit scores aren’t set in stone. You have the power to change yours and pull it up the ranks. Take a look to see what good habits will help you achieve this financial goal.
1. Paying Bills on Time
Paying your bills on-time is a great financial habit for a lot of reasons: you repay creditors, you avoid late fees, you avoid penalties, you avoid collection activities, you lessen your debt load and you improve your credit score. Skipping payments on a regular basis will negatively affect your relationship with creditors and lower your score.
How can you get in the habit of always paying these bills ontime?
- Calculate how much you need to pay all of your bills through a monthly budget. Always give yourself a little more than the exact number, just in case there are fluctuations in the costs.
- Use one of the best calendar apps to keep track of upcoming deadlines and remind you to make payments.
- Automate payments for revolving credit accounts.
2. Diversifying Credit
Having a variety of credit can help you get a better score. So, whenever you’re considering adding on another type of credit account into your personal finances, you should look into different borrowing options than what you’ve already used.
For instance, you could look into a personal line of credit instead of applying for an installment loan or adding another credit card into your wallet. Click the link if you’re wondering what is a personal line of credit and who is eligible to apply for one. The decision could diversify your credit mix and may give you an opportunity to improve your credit history.
3. Paying More Than the Minimum
One of the biggest credit card mistakes you can make is paying the minimum every time you get a credit card bill. Paying the minimum won’t chip away at your card’s balance, and it will encourage you to ramp up your credit utilization — which can hurt your score. Make a habit of paying more than the minimum every single month.
4. Keep Your Utilization Rate Low
Credit utilization is a big factor when it comes to credit scores. Depending on too much credit is a problem but having a zero credit utilization rate is also something that you should try to avoid. Ideally, the rate should be 30%. How can you do this? Use your credit consistently for manageable purchases and pay down the balances as best as you can.
5. Practice Patience
Patience is an important habit to practice, especially when it comes to your finances. For instance, you might be inclined to apply for lots of loans or credit cards in a short period of time, but it’s better to wait. Give yourself time to build credit history and prove responsible repayments before taking on more.
You’ll also want to be patient when it comes to paring down your debt. You shouldn’t push yourself to empty savings accounts, spend your entire paycheck or forego essential expenses just to eliminate the balance faster. Dealing with debt is a marathon, not a race.
These good habits will do more than help you improve your credit score. They can lessen your debt load. They can boost your monthly savings. They can change your relationship with money for the better.
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