Lowering your credit card debt will increase your credit score
Credit card debt is one of the biggest factors effecting your credit score. When we are working with our credit repair clients, one of the main reasons we turn clients away YES, we turn them away! Is that they don’t really need credit repair. What they need to do is pay off their credit card debt. Their score is low because almost every line of credit is maxed out. We advise them that if they want to raise their credit score significantly they need to pay off their credit cards. They can do this many different ways from creating a budget or hiring on of our debt consolidation services. In this article we will go over the benefits you get when you get in the habit of paying off your credit cards each month.
Buy what you need NOT what you want
One of the biggest problems with owning a credit card is accruing credit card debt. Excessive credit card usage will lead to a high debt to income ratio. Your credit score will suffer even if you make all your payments on time.
When making purchases with your credit cards you should stick to buying things which you need instead of buying those that you want. Purchasing luxury things with credit cards is among the simplest means to get into debt. If it is something that one can live without you should avoid charging it.
With each purchase ask yourself will you be able to pay this off at the end of the month. If not, you should think about if you REALLY need it. If you do, adjust your budget so you can quickly pay it off. You will see a dip in your credit score while you are carrying a large debt, but you can raise your credit score back up to where it was by quickly paying it off.
Be careful with 0% interest credit card
Carefully consider those cards that offer you a zero percent rate of interest. It might seem quite alluring at first, but you may discover after that you’ll have to pay sky high rates in the future. Learn how long that rate is going to continue and what the rate will be when it expires.
Tip: Call your credit card company before it expires and see if they have another promotional rate available for you. Make sure they understand that you will move your balance to a new card if the rate they offer you is too high. Most will find someway to work with you so they keep your business.
Use online tools to manage your credit cards online
Most credit card companies now have on-line resources where you are able to manage your daily credit activities. These resources give you more power than you have ever had before over your credit, including:
- paying your bill
- requesting a credit limit increase
- reviewing and downloading past credit card statements
- being able to monitor your credit cards pending charges to make sure your credit card hasn’t been compromised by identity thieves
- some of them offer a credit monitoring service. Take advantage of these services especially if you are trying to raise your credit score. You want to be able to see what all 3 credit reporting agencies scores are
To raise your credit score, get in the habit of paying your credit cards to a zero balance
I can’t say it enough. Leaving a balance on your credit cards increases your debt to income ratio and lowers your credit score. You are probably on this site to learn ways to raise your credit score. If you decided to pay off all your credit cards to a zero balance each month you will see a significant increase in your credit score.
Use a credit card to pay for a recurring monthly expense that you already have budgeted for. Then, pay that credit card off each and every month, as you pay the invoice. Doing this will build credit with the account, but you do not have to pay any interest, if you pay the card off in full each month.
If you pay your credit card statement with a check monthly, be sure to send that check out when you get your statement so that you prevent any finance charges or late payment fees. This is great practice and can help you create an excellent payment history also.
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