Chances are there will be at least one time in your life a good credit rating will be important for you, whether it’s buying your first home and using a mortgage or for a smaller financial purchase. If your credit rating is poor, you might find yourself rejected for a loan or financing in the future. There are a lot of things that contribute to your overall credit rating, such as your credit history, how much total debt you have, whether you have defaulted on any payments and so on.
Knowing that there’s a very good chance you’re going to need a good credit rating, it’s important to manage your finances with your credit score in mind.
The first step is finding out what your credit rating is if you haven’t done already. There are a lot of different websites where you can get your free credit report so you can find out what your credit score is and then use these tips to improve it:
1) Reduce Your Debt
This should hopefully already be a part of your money management plan and is a great way to boost up your credit score. If your credit store is particuarly low and you have a large amount of debt, then you might see a dramatic increase in your credit score if you get your debt out of the way. There’s lots of different ways to get rid of debt, for a great suggestion check out how to eliminate your debt.
2) Be More Consistent With Payments
Missed a payment here or there? It might affect your credit score more than you think. If you are bad at remembering to make credit card payments, add in a monthly reminder to your calendar to ensure you keep up to date with payments. Missed payments do not look good, even if they are only missed because you simply forgot. Add in a little reminder or set up automatic payments to ensure you never fall behind.
3) Only Finance What you can Afford
I know people who have been majorly sucked in by financing things they don’t really need just because it’s a great deal. A great deal isn’t so great if you can’t actually afford it, end up missing payments and ultimately have the item repossessed. I would hate to think what something like that would do for your credit rating. I tend to avoid financing all together as I prefer to save and then buy, but if you like financing just make sure you do it right.
4) Get Small Credit Card Limits
I recently applied for a new credit card to open a new Paypal account and also for travel rewards. Guess what limit they gave me straight off the bat? £15,000! Outrageous! What would I need £15,000 in credit for? I could buy a whole new car straight from the shop on my credit card… that seems absolutely outrageous to me. I went online and immediately reduced my limit to the minimum, which is $10,000. Having such a big limit is such a recipe for disaster. I’d never want to have more than a month’s wage as my credit card limit, what could you ever need it for? The reason a smaller credit card limit will help your overall credit score is that there’s a lot less chance of you getting yourself in a really sticky situation. Of course, even with a small credit card limit you’ll still need to use self control to ensure you don’t spend what you don’t have.