The average credit score in the US stands at 695. Typically, an excellent score lies between 660 and 719 while an excellent one is 720 and above. Unfortunately, more than 30% of Americans have a poor credit rating of 620 and below. Accessing loans and mortgages is difficult when you have an unfavorable credit score. Fortunately, managing your credit helps you pay your debts quickly or avoid new ones. Consequently, your rating improves. To help you maintain a healthy credit record, here are 6 credit advice tips you should know about.
- Settle Payments on Time
Financial institutions report missed or delayed payments, and this can hurt your credit score. To protect yourself, send automatic payments to your creditors. You can set reminders as well, so that they can notify you when a payment is due. Moreover, notifying your creditors beforehand is an excellent idea if you cannot meet your obligations on time, due to unavoidable circumstances.
- Limit Credit Accounts
A recent Gallup poll revealed that 71% of Americans own a credit card. Many of them have other credit accounts on top of that including mortgages, student loans, and store-revolving accounts. It’s worth noting that every loan or credit card you apply for generates a hard inquiry. These inquiries stay on your credit score report for two years on average, and lenders usually see too many of them as a red flag.
- Stick to Realistic Budgets
Budgeting is critical if you want financial independence. The first step towards this goal is getting out of debt. A budget helps you settle payments without forfeiting your daily needs. More specifically, the budgeting schedule will have various categories including repayments, income, and savings. Setting aside funds for repaying your debts can significantly improve your credit rating. Besides, you can get always get a free credit score report from Crediful to see how well you are doing, as you move along with your budget.
- Track Your Spending
Budgets help you project your income and expenses. They guide your expenditure as well. However, things might change as soon as the budgeting period starts. For example, the cost of utilities may rise exponentially. Overspending on a few items is also possible, while unforeseen circumstances may be financially crippling. That’s why it is important to track your expenses. Tracking your expenditure can help you identify flaws in your budget. Doing so allows you to limit your spending so that you can increase your credit payments.
- Create an Emergency Fund
As mentioned previously, unforeseen circumstances can cripple you financially. Additionally, they can interfere with your ability to earn a steady income. These circumstances include medical emergencies, natural disasters, and costly legal battles. Dealing with such issues might force you into additional debt further weakening your financial position. Creating a backup fund helps you avoid this situation. Set aside three or months’ worth of living expenses in case you face an emergency, while you handle your loan repayments.
- Redirect Extra Income
Unexpected sales volumes and bonuses are typical in many business practices. Budgets do not contain these sources of income because predicting them is difficult in many cases and impossible in others. However, having a specific use for them whenever they become available is critical. Redirecting these funds to your financial creditors helps you reduce your overall debt.