How Raising Your Credit Score Could Save You Money
Nowadays more and more people are realizing the value of having a good credit score that can help save some money. Having one is important if they want to get loans at lower rates, get a job or even an apartment, among other things. Therefore, if they want to get a good credit score, they should pay their bills on time, correct any inaccurate information on their credit report, and not max out the available credit in their credit cards, to name a few. But little do they realize that their credit score is a snapshot of their overall financial habits. So if they really want to raise their credit score, you should not just focus on your bills and lines of credit but also on the way you handle your everyday finances and spending. Wise handling of expenses can therefore help you get out of debt and save you more money that can go to your bills. Here are five of the best ways you can do everyday that can help you be in control of your money.
Plan your budget carefully and stick to it.
Most financial experts will tell you if you want to manage your debt or be in good financial condition, then one of the first things you should do is create a budget and follow it. This is an overlooked step because many people think that it is boring, complicated, or only for those who can't afford to have everything. But planning a budget is really simple. You just have to write on paper your total take home pay each month and how much you should spend on your needs like food, utilities, transportation, bills, entertainment, hobbies, and so on. Then after writing down and estimating how much of your income should go to a certain expense, faithfully follow your budget. Some expenses might change, but at least you have a good estimation that lets you see if you meet all your financial responsibilities.
Many people think that budgeting is only for people who have less money and want to save more of it. This is not true. Everyone can plan budget regardless of his income. Even governments and corporations have their budgets, so you should, too.
Live within your means.
In conjunction with the above step, having a budget can help you live within your means because you are more aware now as to how much of your income must be going to every expense. If you don't have a budget and buy whatever your impulse tells you every time you see something in a store, you will be spending your hard-earned money for sure and have little money left for your debt payments and other important things.
Do not spend if you really do not need to.
We are in an environment where we are always told to buy, buy, buy. We always think of snatching up our hard-earned money from our pockets in every opportunity when we could save by doing it ourselves instead. When we want to read, for example, we think of buying a book instead of going to a library or borrowing it from a friend.
There are many other ways you can avoid spending more so you can save more money and pay off your debt.
- Do it yourself. As I mentioned, doing it yourself can save you more money than you imagined. Making a home cooked meal instead of eating out or having a food delivery, washing your car or mowing your lawn instead of hiring someone else can help you spend less.
- Buy used or discount items. You can save more money if you will buy used or discount branded items than paying at retail prices.
- When you go outside, do not bring your credit cards and have a small amount of money with you instead. That way, you will avoid impulse buying which will lead to overspending.
Save a portion of your monthly income.
When you finally receive your take home pay, it is easy to spend it all on things you want to buy. But you should at least save a portion of it and leave it untouched. Saving a month and storing it in your bank account can prepare you in emergencies that can greatly need a large amount of money and can in turn hurt your credit score if you are not otherwise prepared. Saving 10% of your income is a good goal, which can easily accumulate every month.
Prepare an emergency plan.
There will be unexpected crisis such as loss of job, sickness, or lawsuits that can ruin your financial stability and all your credit-building efforts if you have not prepared in a long time. Having an emergency plan in hand can therefore prepare you for such disasters, and protect your credit score and all the efforts you have worked so hard on. In your emergency plan, you must include a list of assets you can liquidate, a list of resources you can use such as insurance, a lawyer you know who knows the financial facets of law, a severance package your employer is offering, and so on.
Keep your credit card balances low.
Keeping all of your credit card balances below the 50% threshold of available credit will raise your credit score. Keeping all of those balances below the 25% threshold will improve your credit score even more. If necessary, transfer balances from one account to another in order to meet these thresholds. dditionally, you could request an increase in your credit line. This would automatically reduce on a percentage basis the amount outstanding.
Pay your bills on time.
The largest component of your credit score is your payment history, accounting for 35% of the weighting in the formula for determining your credit score. As such, the most important step in getting and keeping a high credit score is to pay your bills on time. If you have a low credit score because of late payments in the past, you can immediately start to raise your credit score by making your loan payments on time. To get and keep a high credit score, you must follow this rule religiously.
Have the credit agencies remove incorrect information.
Obviously, if there is incorrect information in your credit report that is to your advantage, don't ask the credit reporting agency to remove it. However, very rarely is incorrect information beneficial to you. Periodically check your credit report to verify accuracy of content. If there is incorrect information that negatively affects your credit score, contact the credit reporting agency and have it removed.
Keep your older accounts, close newer ones.
Roughly 10% of the factors that are used to calculate your credit score relate to the length of time you've had your accounts. It is quite common for some people to hop from credit card company to credit card company constantly seeking to take advantage of a low introductory interest rate. This makes sense from a financial point of view, but it can lead to a lower credit score. You will be awarded a higher credit score if your accounts have been open and active for a longer period of time. Multiple new accounts lower your score, whereas a stable number of credit accounts that have been used for years upon years will significantly raise your credit score.
Borrow great credit from a relative.
You may be wondering how it is possible to borrow credit from another person. It is very easy to do and is especially useful to young adults who have yet to establish credit (although anyone can benefit from this technique regardless of age). If you have a relative or close friend with excellent credit history, have them add you to one of their credit card accounts. Ideally, they should add you to an account that they have used for years, has a high credit limit, low or no balance, and has a perfect payment history with not one late payment. When you are added on this account, the payment history of this account is also recorded on your credit report because you share the account. Presto! You now have a great credit reference on your record. This is perfectly legal and can be used to immediately raise your credit score.
Some insurance companies are now using credit scores to rate the quality of potential customers and any employers are also using them as part of their decision-making process in hiring new applicants. These trends are likely to continue and expand, making high credit score even more essential with each passing year. Now is the time to start taking steps to get your credit score into the excellent range. You'll have thousands of dollars in borrowing costs and will reap the rewards for a lifetime. So you see, it's not enough that you pay your bills on time to raise your credit score if you do not live by healthy financial practices that can help you save you more money in the first place. Find more ways to manage your finances well and make you are in control of your money instead of your money controlling you. Ways To Increase Your Credit Score, not only teaches you secrets and tactics on how to raise your credit score and save money, but also credit repair scams you should avoid, daily financial habits that can help you improve your credit score and everything else you should know about getting an excellent credit rating.
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