Having a good credit score is a common benchmark tossed around in the financial world. And yet, the small details of what positive credit actually means, how it’s achieved and maintained are infrequently discussed in everyday conversation. It wouldn’t be surprising if the offer of the retail clerk to apply for a store credit card was the most common mention of credit in daily life.
Unfortunately, utilizing one’s credit card as a magic money card, as thrilling as a big shopping spree or an extra 10% off can be, leads down dangerous paths. While the consequences of impulse buying might seem inconsequential or far off, racking up poor credit or falling deep into credit card debt is frighteningly easier to do than building good credit.
Building a good, healthy credit score not only takes time, but discipline. But this determination is absolutely worth the effort as it can put you in a place of excellent financial standing in order to afford the purchase of a house, manage and pay off debt, and keep those pesky interest rates low.
It all sounds great, but how do you actually rebuild your credit score and what are the best ways to restore it quickly?
We’re glad you asked.
1. Stay on top of your payments
Nothing damages your credit score like a late payment. In fact, it’s the main method of hurting your credit score, as late payment notices can stay on your credit report for nearly eight years. That’s a long time when you’re trying to improve your credit score today. However, all is not lost if you have one or more late payments on your account.
If you haven’t paid your statement balance for longer than a month, it’s important to call your credit card company immediately to work out a repayment plan. Otherwise, begin taking the steps to get your account out of “delinquency,” that is, free of overdue payments and back to $0 due, if possible. The sooner you begin making payments towards a healthy account standing, the better your credit score will begin to look.
2. Pay your bill more frequently than just the due date
While paying your statement by the due date is the first step in rebuilding and maintaining good credit, you can take that one step further by making more frequent payments throughout the month in order to keep on top of your bill and minimize or completely abolish interest rate payments. Some people choose to pay their statement twice monthly, possibly right after a biweekly payday. Others choose to pay off their statements immediately after they charge a purchase to their credit card. This helps one stay on top of payments, avoid missing payment due dates and late fees, and build a good credit score through prompt repayment.
3. Use auto payment options
Regardless of whether or not you choose to pay your bill more than once a month, setting up an auto withdrawal will prevent you from missing a payment. Keep in mind that you will need to keep the balance of your bank account high enough to make these credit card payments – however, if you’re living within (or even below) your means, this should not be an issue. After all, the first step in improving your credit score is making sure you’re not spending money you don’t have and can’t repay.
4. Create a budget
If you want to improve your credit score, impulse buying, non-budgeted spending and ignoring one’s financial state shouldn’t be in the cards. Setting up and sticking religiously to a budget is a must when minimizing improper credit use. This will reduce the risk of overspending money you either didn’t have in the first place or didn’t want to spend from the get-go. Plus, it will give you practice in the life-long virtue of self control.
5. Stop using credit
While building credit is necessary to an impressive credit score, there’s a time and a place for it. If you are struggling with credit card debt, a house mortgage or student loan debt, it’s probably not a wise idea to continue using credit for the time being. Paying off these other financial burdens reflects positively on your credit score, so even if you hold off spending on your credit card, it won’t cause you further damage. Wait until it becomes manageable to meet your credit card payments before using credit as your main means of payment, and even then keep it on a tight leash.
Financial management skills for life
While certain lifestyle patterns can make managing finances difficult, it’s never impossible to become financially fit, as they say. For those who are on the road to recovery and are working towards building a better future for themselves, financially and/or otherwise, taking small steps in the right direction is paramount to overall health and wellness.
For more information or other counseling services, reach out to Real Recovery Sober Living today at 1-855-363-7325.