Getting credit for a planned purpose might be difficult, but using it to accomplish that goal is also challenging. Many people find themselves entangled in a messy situation on how to use this borrowed money. If you also face the same problem, take heart because you are not alone. Let me review seven useful tips that can help you utilize your credit correctly to achieve those financial goals.
Table of Contents
- This blog discusses 7 inspiring tips on how you can use credit responsibly to achieve your financial goals. Let us begin.
- The Bottom Line
This blog discusses 7 inspiring tips on how you can use credit responsibly to achieve your financial goals. Let us begin.
Keep Track on Your Credit Score
This is an essential step when you want to receive credit. Attempt to request your credit report if possible, each year to get informed of the credit score. The score is an aid to prospective lenders like 365 Credit Solutions who check it to ascertain if you’re capable of repaying the money they give you. It is a figure between 300 and 850, and having a 720 or more score is an excellent indication that you’re worth lending.
The information in the credit score also indicates if there’s an error in your credit report that needs to be fixed. For instance, the report might read that you have unpaid balances, which is not so, or someone could have hacked your information and opened a statement in your name. These errors may lower your score. So, get them corrected no matter how long it will take you. By doing so, you will increase the chances of securing credit, even larger ones.
Maintain Low Credit Balances
This is yet another critical credit factor to consider in case you want to apply for a loan. For you to keep a good score, the combined balances shouldn’t exceed 30% of the total credit limits. If possible, you should pay off your balances ultimately at each month’s end. It is a way to show that you’re using the credit lines properly while also retaining a low DTI (Debt-To-Income) ratio. Above 30% of your credit limit is uncertain even when you want to pay off the balance when the billing statement comes. It’s advisable to pay sufficient money to lower your balance below that percentage before closing the billing month.
Ensure Payments Are Made on Time
Timely payment of bills contributes to the wellbeing of your credit score. Having a good payment history impacts your score positively. Paying your bills on time can also affect your capacity to acquire new lines of credit. Always make sure you pay all of them on time, even if it is a small one. Establish a secure credit by avoiding late payments and staying on top of all your bills.
Manage Your Accounts
Being able to manage your accounts properly will assist in keeping up with the use of your credit. Do not close all your accounts as this might be unwise. Doing so will decrease your available credit. Your lender no longer sends updates to the bureaus, and less weight is put on such inactive accounts. After some time has passed, the bureau removes the closed account’s record from your report. Loss of that credit record will reduce your average credit age and lead to a drop in your credit score. Keeping these accounts open even if you’re not using them can earn you rewards; thus, there’s no reason to close them. Even so, you can close accounts with unreasonably high annual interest rates or fees once you pay off the balances.
Improve Your Credit Limit
Ensure you increase your credit limit by paying your bills on time each month. If you have been doing so, then request your lender to raise your limit. A higher credit limit will help you boost your credit score and promote the DTI ratio. On the other hand, avoid, if possible, applying for new credits as too many will affect your score negatively and reduce average credit age.
The other key to improving your limit is to understand what goes into your credit score. Such things, like your recent credit, debt level, and credit mix, are essential information used to determine your score. The more you understand them, the easier it will be to improve your limit and retain a good credit score.
Refrain from Making Big Purchases
Most lenders prefer a financial record that is traceable. They don’t like seeing unexpected changes in how you make your purchases. For instance, if you’re planning to buy a mortgage, you should focus on that and not make any other big purchases until you close that one. Making any such purchases during your home application course can hinder the possibility of being approved. You can also make small purchases occasionally from your accounts to prevent them from being inactive, thus closed by the lenders.
Build Your Credit
Use any of the methods available to establish your credit, even if you’re starting the journey. You can become someone’s authorized account user. That will enable you to build your confidence if payments are appropriately made. Ensure that the person you use his/her account is capable of paying bills on time since failure to do so can negatively impact your credit record.
Likewise, you can obtain a secured credit account, which is backed by a savings account. The money you deposit on the savings account acts as security for your credit account. If you promptly make purchases and payments, you will be able to build your credit score like you would for other credit accounts.
Finally, the other option to establish your credit is a credit builder loan. In this case, you borrow money and freeze it into a savings account until the time you’ll complete refunding the loan. If you make your monthly payments on time, this information is posted to bureaus resulting in a build-up of your credit record and improvement of the credit score.
The Bottom Line
Reaching your financial goals depends highly on how you utilize your credit. You need to ensure that you have an excellent credit history and score to gain your creditors’ confidence in you. The inspiring tips above can help you keep track of your financial goals as you make the best use of your credit. Don’t hesitate to seek your lenders’ guidance; they’re the most excellent source of information you might require.