Does your credit score suck? How come you can't get a loan anywhere? Can't even get a credit card because of a low credit score? Don't worry, your not alone! Even I got suckered into a couple credit cards and didn't even realize what paperwork I was signing! (Easily avoidable now!) The topic of credit is one that comes off as complicated, intricate, and a general nuissance to many, but below I've simplified how you can start bettering your credit as well as the important factors that determine your credit score.
There are two easy steps you can take right now to help your credit immediately. Start by paying all of your bills on time and then reduce the debt that you are 'utilizing'. Right now i'll dive into the world of credit cards and how they can be your BEST Friend, or WORST Enemy...
This topic not to say debt is bad, however your credit score is calculated based as a percentage of how much debt you have, vs have much your allowed to have. Lets say you have a $1,000 credit card limit. If you have $800 on your credit card, it is going to look horrible because you are "utilizing" 80% of what your allowed to spend. There is two things you can do, and I caution you with the second.
First, you can pay off your debt at the end of each month (That will definitely look good on your credit report and to your bank!). Just remember, that the second you decide to roll the unpaid balance into the next month... You are going to get hit HARD with interest rates! Those suckers can be as high as 25% which means your original $800 bill is now $1,000 that you owe to the bank!! I don't know about you, but there are a lot of things i would rather do with $200 than to blow it at the bank for no reason.
Second, you can pull off a rich persons secret. See to them debt is not an enemy, and instead its a tool. Correctly used in an investment, they can earn more money on the investment than what they are paying in interest on a loan. How does that affect us though? Well if you take that same $800 and put it on a credit card with a $5,000 credit limit, now your only utilizing 16% of what the bank has allowed you to spend. Same $800, crazy huh? Also it is going to looking amazing on your credit score. Your goal should be to keep your utilization around 30% or less. Caution though, the bank will raise your limit even if you can't afford it, so realize how to control your spending first and pay off that card each month.
YES, that means that bran new car you bought, just lowered your score, HOWEVER! If you pay your payments regularly it will eventually level out and help with your 'length of credit' and 'paying your accounts' on time.
The Solution To Debt!! Don't have enough money to pay for your credit card?? First thing you can take action on at the end of this paragraph, is to go onto your account history for everything you spend each month and simply write it down. I believe in you! Write down at least the last 3-4 months and categorize everything into subjects like Bills, Gas, Food, etc.
Now calculate how much you earn each month. Do you spend more than you earn? I know back when I did tried this, I was going to circle the drain quick if I didn't do something about it! I realized I was blowing around $1,000/month on just food for two of us and a couple dogs. Way too much money and the easiest thing that even you can reduce. I now challenge you to buy fresh groceries and cook! Friends coming over? You can BBQ and have a cooking fest, it'll be fun and soo much cheaper than eating out! I know every time my friend Aly brings her son James over we end up cooking and never eat out. I promise it'll bring your friends closer together and you'll save tons.
In conclusion, I want you to know that debt is not bad, so long as you can control it. Now go out there and rock those finances.
Remember if you ever have any questions feel free to contact me at any time, or if you have a topic you want covered just let me know!