Majority of money saving experts agree, repairing your bad credit can actually save money in the long run. Bad credit can hurt you more than you think. It leads to higher interest payments for all your loans. A person with a low credit score will ultimately pay more in interest. This means that you are going to pay a lot more for your house or car than what it usually takes. If you use a credit card for your transactions, you will have steeper credit lines.
Having a good credit score or rating plays a big role in everything in our financial lives. It tells us a big picture regarding how we handle money and credit. At first look, saving money might not look synonymous with credit repair. But the two actually do hand-in-hand. You don’t need to spend a huge amount of money to repair your credit or to start building a good one. Here are 3 important tips in turning your bad credit score into cash:
- Start Paying On Time and in Full.
One easy way to improve your credit is to start paying your bills on time. Prompt payment is a vital part of getting a better credit score – it accounts for as much as 35 percent of it. While it may seem counterproductive to pay for credit cards over saving money, it will actually limit your debt and avoid super expensive late charges. Also, it pays to get rid of all your debt in full each month. Paying the minimum balance lets your interest compound. Always pay in full. At the same time, don’t withdraw cash on credit cards. It is more expensive to do as banks will charge higher interests rates for this. It means that you are essentially paying more for the privilege of holding your debt in cash.
- Put Your Financial Life in Order
Creating a detailed budget will take a little effort, but the benefits will be enormous. This will aid in repairing your credit and saving you money. Spend at least one – two hours per week crafting a financial plan. With pen and paper, list every financial liabilities you may have and all your expenses. Using copies of your last few months of bank statements and credit card bills, try to build a picture of your outlays. Identify those amounts you can automatically pay using your credit card to help build up your credit.
- Improve Your Credit Utilization
Start by determining your credit utilization ratio. This is an important factor in your credit score. You can do this by dividing your total credit balances by your total credit limits. The more available credit you use from month to month, the lower your score will be. Focus on improving this ratio. Start by paying down your debt and keeping your balances low. If your bank allows it, pay more than once. Try to secure a higher credit limit. This will immediately drop your utilization rate. If your card issuer offers to raise your limit, take it. Always ask for a higher limit once you have a credit card for more than two years. It might trigger a credit inquiry that will hurt your score for six to 12 months but eventually it will lower your credit utilization ratio.
Repairing your bad credit is an important step of saving money. You don’t have to spend a lot of time or effort in doing so. If you want to get a free guide that explains the easy steps on how to repair your bad credit, you may click here. If you don’t know where to start, one easy way of repairing your credit is to work with a credit repair agency. If you want to check out my review of the top rated credit repair agencies, you may refer here.