7 Tips to Build Good Credit Without Going into Debt
Sadly, a credit score can’t just be immediately boosted back up to a stellar number once it’s been tainted. This is because the credit bureaus take into account your financial history and past behaviors not just present actions. However, if you make the right moves and are also consistent about working to raise your credit score then you can raise your credit score slowly but surely. In fact, there are plenty of easy steps you can take in order to increase your credit score that doesn’t require that you go into debt. Here are seven ways that you can improve your credit score while keeping your finances in order.
Watch Out For Your Credit Card Balance
One of the main factors that determine your credit score is how much revolving credit you have versus how much credit your actually using. The smaller the percentage, the better it is for your credit history. It is recommended that you keep your debt to credit ratio lower than 30%, and keep in mind the lower it is the better. This means that you should attempt to pay down your balances and keep them as low as possible.
Eliminate Any Nuisance Balances
An easy way to quickly improve your credit score is to eliminate any nuisance balances. These are the types of balances that you keep on any number of credit cards. Eliminating these small balances will raise your score due to the fact that a factor in determining credit scores is how many cards you have open that have active balances. This means that charging different credit cards at different times instead of just using the same card to make purchases can lower your credit score. The solution is to simply gather up any credit cards that you have a small balance for and pay them off, and then stick to using one or two cards.
Leave the Good Debt on Your Report
Some people think that old debt on their credit report will hurt their credit score. However, although negative items are in fact bad for your credit score, old paid accounts are not. The truth is that good debt, which is the debt that you paid as agreed and handled well, is good for your credit score. The longer history you have of good debt, the better it is for your credit score. In order to improve your score, leave good accounts and old debt on it for as long as is possible.
Use a Calendar
If you are looking for a new home, car or student loan, it’s recommended that you look around for the best rates in a short amount of time. This is because every time that you apply for credit, it will cause your credit score to dip for an entire year. Keep in mind that if your lender is using the newest form of scoring software then you’ll have 45 days in which to make credit inquiries before it affects your credit score, however with older forms it will take just 14 days.
Pay Your Bills on Time
If you are planning to make a big purchase such as a car or a home then you may be struggling to get together a large chunk of cash. While you are figuring this out, you don’t want to start sending in bills late, as this can lower your credit score and scratch out any deal you could have made. One of the best ways to keep your credit score high is to make payments on time every time. If you’ve been bad about paying your bills on time then that will damage your credit and hurt your credit score.
Don’t be a Risky Borrower
A good way to increase your credit score is to avoid doing anything that will significantly lower your score. Two of the biggest ways to do this is by missing a payment or by paying less then you normally do. Another change that could mark you as a risk is using credit on things that could put future stress on your finances. Using too much of your available credit is always frowned upon as far as calculating credit scores go.
Don’t Be Obsessed
Although you should focus on improving your score, especially if you’ll need credit in the future, you shouldn’t obsess over it. Take care of all your bills and use your credit wisely, and your score will begin to reflect your smart financial decisions. If your planning on making a big purchase then get a copy of your credit score a few months in advance. This will provide you with specific means of improving it. If you are denied from credit or didn’t qualify for the best rate then keep in mind that you’re entitled to view the score that the lender used thanks to the Consumer Protection Act.