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5 Ways to Improve and Maintain Your Credit Score

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There are certain things that just make life a little easier and having a good credit score is one of them. Having good credit is important for several major financial transactions, including purchasing a car, securing a mortgage, or even renting an apartment, especially in a big city like Chicago where rent prices are on the rise. Unfortunately, when it comes to maintaining a healthy credit score, many people find that their past mistakes come back to haunt them. However, all hope is not lost for those with bad credit. These five tips can help you raise your credit score and get back in good graces with lenders.

1. Pay Off Credit Cards

If you want to know how to raise your credit score, start by addressing those little plastic cards in your wallet. Having one or two low-balance credit cards that you regularly pay off is one way to build good credit, but building up excessive debt, not making regular payments, and having multiple cards with open balances can damage your credit score. Ideally, you never want to use more than seven percent of your available credit.

When determining your credit score, companies consider how many cards have balances on them. Pay off any small balances immediately. Next, work toward eliminating larger balances, and focus on paying off the cards with the highest interest rates first.

2. No More Late Payments

Paying bills late is a sure way to damage your credit score. If you are routinely facing late bills, examine why your payments are often behind. Do you find yourself struggling to come up with the money to pay the bill? If so, it may be time to consider making lifestyle changes or even selling high-cost luxury items. For example, if you can only afford the utility bill or the car payment, the utilities should receive priority. If needed, sell the car for a cheaper vehicle with a lower monthly payment or no monthly payment.

Maybe your bills tend to be late just because they are forgotten about during daily life. Try enrolling in an auto-pay program to solve this issue. Most bills have the option of being automatically deducted from your checking account each month. This saves you the hassle of having to worry about paying them and ensures that they are never late.

3. Do Not Close Old Accounts

Even if it seems counterintuitive, leave old debt and paid off accounts on your credit report. It may seem odd to want to showcase past debts, but if the debt has successfully been paid off, this will work in your favor. While it is true that negative information may hurt your credit score, most forms of negative information, apart from bankruptcy, can only be listed on your credit report for seven years. However, if your car, home or credit card was paid off without a problem, this should be left on your report as a way of building a good debt history. The longer your positive credit history, the better for your credit score.

4. Be Mindful of Appearances

Before opening that new store credit card, remember that each credit inquiry deducts roughly three to five points from your credit score. Thus, avoid applying for multiple credit cards or loans within the same timeframe. Similarly, keep things consistent when managing your current balances. If you suddenly miss a loan payment or begin charging more to your credit card, it can drop your credit score. You do not want to take any actions that imply you are facing instability or are about to make sudden financial changes.

5. Dispute Inaccuracies

Credit reports sometimes contain mistakes and inaccuracies that could be harming your credit score. Ideally, you should check your credit report at least once a year by ordering reports from each of the three major credit bureaus – Equifax, Experian, and TransUnion. If you spot a flaw, the first step is to send a letter to the credit bureau. Many people prefer to mail in letters, but there all three major bureaus also provide ways to file a written dispute online. In either case, the letter should explain the error and include relevant supporting documentation along with your full name and address.

You should also write a letter to the company that provided the information to the credit bureau, known as the furnisher. Some common types of furnishers include banks and credit card companies. Inform the furnisher that you are disputing a claim on your credit report, and once again, include relevant documentation to support your case. When mailing documentation, always send copies rather than originals. Likewise, keep a record of all interactions you have with the credit bureau and the furnisher. They should investigate your dispute within 30 days of receiving your letters. Credit bureaus are obligated to report the results to you within five days of closing the investigation.

If your credit score is less than ideal, you are not alone. Fortunately, by making lifestyle adjustments, staying on top of payments, and carefully watching for mistakes, you can easily begin to rebuild your credit.


Paying Annually rather than Monthly

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This is more of a decision based method of saving some month rather than a personal way. But I’m sure there are some applications for personal finances.

During the fall, I was turning over every rock, checking every crack and so forth trying to find additional ways to save some money. And what I discovered was that many of my subscription based services I use for business are cheaper if I pay them annually versus monthly or quarterly.

One of the things I’ve begun doing, again on the business side, is paying those services annually to save some money. I’ve also been carefully evaluating each service to determine if its truly needed.

Reviewing and Planning Time

I mentioned looking at these things on the personal side of things earlier this month. But I’m back at it today…

Reviewing my upcoming finances, planning out a few more months and looking for any fat I can trim…both personal and business. And I can’t find anything!!

I have two more business expenses to transition from monthly to annual, but I don’t won’t to spend that “chunk” right now. And I’ve got some other software I need to purchase shortly for a new project.

Baby Step Lessons

What this financial review time is telling me is that

  1. Paying any subscription services annually rather than incrementally is worth it. In many cases, I am saving 10-20% annually. And that adds up. You know, even where there is no discount for paying annually, the once a year payment takes a substantial amount of stress off when looking at monthly or quarterly finances.
  2. I need to bulk up my EF even more. While $2,000 feels good, it wouldn’t even cover a month if something happened to me.
  3. And probably most importantly, I am going to find an accountability partner. I really don’t know what that looks like. But I am realizing as motivated as I am, having someone else who is versed in what is going on will help me and more importantly wise when it comes to money will be helpful for keeping me focused and not scattered like I tend to get. This is a huge step for me, because I’ve been going it alone on the financial front for a long time.

When I sit down next month to review my current financial situation and debt pay off plan going forward, I am going to add additional savings to my debt plan. Not immediately as my debt pay off is first, but maybe starting this summer when some of the smaller debts are gone.

 

 


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