Click to read part 1 of 5 Tips to Increase Your Credit Score
When it comes to money management, there is plenty of talk about adopting a cash-only philosophy. Unfortunately, this really only serves a purpose for debt management/reduction. In the case of credit repair, which typically is the next step after all debts are managed or eliminated, a cash-only lifestyle will do nothing for your credit. If you want to repair or increase your credit score, you must use credit. The trick, however, is how you use credit to increase your credit score.
#3: Pay Debts on Time
Consistently paying your debts on time will do wonders for increasing your score. In fact, payment history accounts for about 35 percent of your credit score. One of the easiest ways to make sure you pay your debts on time is to enroll in automatic bill pay with your lenders and credit card company. You can also set up recurring payments through your checking account via online banking.
#4: A Tenth is All You Need
Just having a credit card alone is not enough to increase your credit score — you have to use it. With the economy the way it is, many banks are adopting the practice of closing dormant accounts. So, in other words, if you don’t use it, you lose it. But, the key to this is to use your credit card wisely. Set a maximum spending target of 10 percent of your available credit.
Each month make a purchase on your credit card(s). Use the card for a night out featuring dinner and a movie or fill up your car’s gas tank using your credit card once a month. Don’t use your cards for big ticket items like a plasma screen TV. Just be sure to keep your purchases under 10 percent of your available credit and you should be able to either pay off your balance each month and on time.
#5: Diversity is Key
Spread your debt out by diversifying how you use and manage it. Begin paying down loans by increasing your loan payments a little each month. If you have more than one credit card, distribute the 10 percent target across all cards. For instance, if you have three credit cards, strive to use at maximum 3 percent of the available balance on each so that you stay under the 10 percent cap you placed for yourself.
These tips will help repair and increase your credit score significantly over time. Just remember not to use credit, don’t overextend it (10 percent is key) and diversify your debt usage. Making the required payments on time every month along with these three things will boost your score. Be patient, because credit repair and increasing your credit score does not occur overnight — you have to stick to it. These changes will hopefully become a lifestyle change for your spending that will keep your credit in good standing permanently.
[...] When your credit score has run rampant like an untrained puppy, it needs to be nurtured over time. Your low credit score can be improved when you set a positive personal finance and credit history improvement plan in motion. There are three important factors you need to remember before you tackle your credit score. [...]
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