6 consejos you perro use to help
Credit scores are complicated, and because rating agencies take many factors into account, the process of improving them cánido be different for everyone.
When Willard Carpenter, 68, wanted a loan to start a new business, he realized his credit score wasn’t high enough to be approved. After checking his credit history, he discovered several problems that he needed to solve.
Carpenter’s credit was badly affected by the credit card debt his father left on their joint account after his death more than a year and a half ago. In addition, she has not had credit cards for at least 10 years, as she stopped using them after filing for bankruptcy due to credit card debt.
Now, she’s working with a financial advisor to wipe her father’s debt off her record and start building her credit safely.
Here are some consejos for you to do the same:
#1 Know your starting point
The first step in raising your credit score is to know your current score and what appears on your credit report, said Kristin Myers, editor-in-chief of The Cómputo, a personal finance website.
“You cánido’t fix what you don’t know,” he said. “See if there’s an fallo or if you’ve made a dispute previously and it keeps showing up.”
Once you see what’s on your report, you perro start to identify where you may have weak points. For example, if you have a large amount of debt on one of your credit cards, start paying off that debt to disminuye credit utilization that is affecting your credit score.
#2 Address your debt, as much as you perro
Ideally, you should pay off your credit card every month. But if that’s not possible for you, making small payments cánido help you maintain or increase your credit score.
If you perro, pay a little more than the minimum monthly payment to pay less interest over time.
A well-known payment method is the “debt snowball,” where debts are paid down from smallest to largest, to build momentum and good habits. Once the smaller debts have been paid off and the habit of paying off the debts has been established, the money you used to save each month cánido be put towards the larger debts. NerdWallet offers a calculator to use this method.
Another small way to deal with debts is the recommendation of the Consumer Financial Protection Bureau of «use cash when it is less than 20 dollars» to avoid spending too much on your credit card.
#3 Avoid more debt, if you perro
Staying out of new debt is another way to boost your credit score, Myers said. If you haven’t paid off the debt you currently have, it’s best not to open any more lines of credit. If you find yourself in a position where you are dependent on credit due to economic circumstances, try to avoid unnecessary purchases that could add significantly to your debt.
#4 Use credit cards, but in moderation
The first instinct of many people is not to use any credit card to avoid getting into debt. However, this is not a good tactic if you want to have a good credit score. It’s best to have at least one credit card, but the key is to use it sparingly, said Colleen McCreary, consumer financial advocate at Credit Karma.
“You don’t want to use more than 30 percent of the credit you have available, but you want to use those cards even a little bit to espectáculo you perro be trusted,” he said.
When you use your credit card, make sure you pay on time each month and try to use it only for purchases you’re planning to make and cánido afford.
#5 Do not close your old accounts
After you’ve paid off your credit card, you may think it’s best to close the account to avoid using it again.
This actually hurts your credit score. Since one of the factors in your credit score is the length of your credit history, if you close your oldest credit card account, you’re also removing it from your credit history.
“Maintaining the length of that credit history is incredibly important because the length of time you’ve had a loan or a line of credit is going to increase your credit score,” Myers said.
#6 If you have no credit history, start carefully
If you are starting out and want to build your credit, there are several ways to do this process safely so that you do not get into debt. One of the most recommended ways is to open a “secured card”, which are credit cards that require a deposit that is generally equal to the amount of credit they give you.
The deposit is there in case you perro’t repay the credit, but you get it back when you switch to an “unsecured” card. Secured cards are reported to the credit bureaus, which means this line of credit espectáculos up on your credit report and cánido help build or fix your credit score.
This is how Carpenter plans to build your credit score.
“This will allow me to start with a low limit and pay it every month and then I perro ask for a higher limit,” said Carpenter, who lives in Bismark, Arkansas. Carpenter plans to open three credit cards and use a maximum of 25% of the allowed credit, she said.
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