3 Ways to Boost your Credit
By: Caydon Burnett
Making progress in credit is significant for everybody. It might seem hopeless, especially if you have a low score due to outstanding debt, missed payments, or past purchase decisions. Whatever the case, you can benefit from the tips below to help get your score back up to a better number.
(1) Treat your card like it's cash!
Refrain from viewing your credit card as extra free money you have available for spending. If you have a card with a $5,000 spending limit, for example, it’s easy to see that as an extra $5,000 you have available to you to spend, and then simply make the minimum payments on what you owe. Generally speaking, you should still make purchases within your existing budget. Think of credit card transactions as mini-loans (fundamentally what they are) and remember you must always pay the balance back at some point. Avoiding the mindset that this is free money and, instead, utilizing it as a tool to build credit will keep you in the right frame of mind to use and build credit responsibly.
(2) Pay on time, in full!
This means you won’t be carrying a constant balance on your card each month, which also eliminates any interest payments you would have when carrying that balance. Paying on time also means you aren’t hit with any late fees or penalties. This also plays a role in how high your credit score will be. If you pay everything off in full—and on time—this reflects that you are a responsible and reliable borrower, which subsequently helps boost your score overall. Whereas you may not see the progress right away, your patience and persistence throughout the months will eventually become evident as your score WILL start to go up. And—if you bank with Clarity Credit Union—you can qualify for our Progress In Credit (PIC) Program, which is a rate-reduction program that lowers your loan rate on a quarterly basis, given that your credit score increases each quarter and you qualify for a reduction. This way, you can save a lot on loan interest, all because you put in the time and effort to practice good credit habits long-term. So, generally speaking, working on having good credit is always going to benefit you in the long run.
(3) Only use a fraction of your credit limit!
While it’s tempting to max out your card, it’s important not to make this a habit. Your credit utilization (the amount you’re using of your limit) plays a big role in what your credit score will be. The reason for this is that it appears as volatile behavior to lenders since you’re spending more money within the same amount of time (monthly). Whether you are volatile with your spending and borrowing habits or not, the reasoning and conclusion for this remains the same. So, not maxing your card out while carrying that balance month to month will help translate to a better score.