A less than perfect credit score isn’t the end of the world. It’s not an ideal situation, but it can be fixed. If your credit score is less than stellar (under 700) you can improve it and it won’t take too long. Creditors report payment history and consumer behavior to the credit bureaus every month and therefore with a change of habits you can improve your credit score within six to 12 months.
All you need to do is start paying off your balances and stop using your credit cards. I know that may seem easier said than done, but trust me it’s not too hard. Start by making small changes in your habits and as you get used to your new money lifestyle you’ll start to see the rewards in the form of an improved credit score.
Here’s how to do it:
Make payments on time
This is the very first step towards improving your credit score because late payments can destroy your credit – and really fast! Even if you can’t afford to make more than the minimum monthly payments you need to at least make that on time because otherwise your credit history won’t get any better.
This doesn’t only include your credit cards and loans, it also includes any type of monthly bill such as electric, hydro and your cell phone.
Pay off high balances first
High outstanding balances are one of the major contributing factors to your credit score. Getting them paid off as soon as possible will substantially help improve your credit score. Even if your credit cards have a low interest rate it’s better to pay off high balances first because any balance over half of the credit limit will lower your score.
Don’t look at high and low interest rates when changing your money habits, just start by paying off the highest balance first – even if it has the lowest interest rate. If you need to make extra payments on your credit cards you may need to cut expenses somewhere else and that means living on less. Don’t worry it’s only temporary.
Close your unused credit cards
I know a lot of people are on the fence about unused credit cards and whether you should close them. On one hand just because you’re not using them right now doesn’t mean you may not need to use them in the future.
However on the other hand creditors report payment history to the credit bureaus and if you’re not using them then there’s nothing to report and that’s not helping improve your credit score.
Don’t apply for anything new
This should be common cents, but I’m going to say it anyways. If you’re trying to pay off your credit cards don’t apply for any new financing, loans or credit. The fewer monthly obligations you have the easier it will be to pay off your outstanding balances and watch your credit score rise up.
If you want to see where you stand financially, check your credit score for FREE with our friends Credit Sesame. You can get your credit score as well as more tips on how to live better when it comes to spending and debt.