There are lots of ways that you can rebuild your credit over time. If you do all of the following, you’re sure to move your score into a higher.
Step 1: Pay Everything On-Time
Late repayments hurt your credit score. From this point forward, make sure that you never miss a bill ever again. You can do this by automating payments for recurring bills through an online banking system. It’s an ideal option for fixed payments (for example, your mortgage) because you can set the payment amount and forget about it. It’s important that you always have enough funds available to make these automatic payments. A miscalculation could put you into overdraft, making you miss the bill payment and rack up bank fees.
If you don’t want to automate your payments, you should at least consider downloading bill monitoring apps that send you reminders whenever a bill is coming up. It’s a real challenge to juggle bills from insurance companies, utility companies, memberships and more. A simple smartphone or computer app could help you keep track of them all.
Step 2: Pay More Than the Minimum
One good habit that you should take up is to pay more than the minimum when your credit card bill comes in. Usually, the minimum payment is between $20.00 to $25.00 — that won’t do much to shrink your balance unless you’ve put very little on your card. The credit bureau Experian recommends paying more than minimum so that you can reduce your credit utilization ratio and improve your credit score.
Making a large payment every month can be difficult when money is tight. To make sure that you have more than the minimum available in your accounts, here are some effective ways that you can boost your savings:
- Use coupons and discount codes when you buy groceries. Click here to see more tips on how you can save more money on groceries every single month.
- Brew your coffee at home instead of getting it from a café or drive-thru. Click here to see more tips on how you can save money on coffee this year.
- Be strategic with air conditioning in the summer. Only turn it on during the daytime when it’s hot outside. Click here to see more ways that you can cut energy costs at home.
- Reduce your entertainment budget by cancelling online subscriptions and services that you rarely use. Click here to see free streaming services so that you can watch your favourite shows without spending beyond your means.
- Track your expenses by making a monthly budget. Click here to read our budgeting series for clear step-by-step instructions on how to make your own budget.
Step 3: Leave Your Accounts Alone
Opening new credit accounts will affect your credit score. Closing any current accounts will also affect your credit score. Essentially, making any big changes will have an impact on your credit. So, prioritize maintaining your accounts over upgrades or downgrades.
Step 4: Use Credit Responsibly
Making every transaction with your credit card or line of credit is a good way to put yourself into financial trouble. Try to use your credit only when it’s necessary, not when it’s convenient. That will keep your balance low.
You can learn how to use your card responsibly in credit counselling sessions — you will have to attend these before completing a consumer proposal. Get more details about these counselling sessions and other David Sklar & Associates services by clicking on the link.
Step 5: Find Low-Risk Alternatives
Look for low-risk alternatives while you’re waiting for your credit score to rise. If you’re planning on moving, consider renting over applying for a mortgage. If you need a new vehicle, consider purchasing a used car instead of buying a brand-new car and taking on a big loan. You could choose other affordable transportation options like local carshare services, public transportation or riding your bike.
You can live without high-risk options for a while. It will give you an opportunity to avoid high interest rates and strict repayments. Use the time to build up your savings and settle into financial stability. Soon enough, you’ll have a credit score that will make a much better impression on lenders.
David Sklar & Associates:
At David Sklar & Associates we offer over-the-phone consultations and electronic document signing so that you can access our services from the safety of your home.