Whether you make a million dollars per year or are living off of minimum wage, you are still responsible for your debt obligations. Credit score is a huge factor in securing not only the best interest rates on the market, but can make or break even getting a mortgage, apartment rental, leasing a car, or could even cost you a potential job. Even having a small income can’t be an excuse for lacking credit, so you should strive to have the highest score possible.
Make Payments On-Time
First and foremost, if you have monthly bills, pay them on time. If you don’t, not only will you get late fees, but if you are thirty days late, they will show up on your credit report and severely damage your score, taking years to come off. A large portion of your credit score is based off of history, so you want to show lenders that you are a responsible borrower when it comes time to application time, where any dip could cost getting you the best rate, which in turn will add significant amount of interest to your payments.
Come Up with Extra Money to Pay Down Balance
It is important to make sure you are out of debt, and I understand that making huge payments to pay down that balance can be tough on limited income, but in order to boost your credit score as your debt decreases and your available credit increases, you may have to come up with extra money somehow. Now that it is summer, there are always opportunities to pick up a second job, but beyond that, you can have a garage sale, sell items lying around the house on Craigslist or eBay, or even donate items to get a tax break at the end of the year.
Keep Accounts Open, Even with Zero Balance
As you start to pay down and finally pay off credit card balances, your first instinct may be to close the account once it’s at zero balance, but that actually could be a mistake. By paying the balance down to zero, you now have more available credit and no debt, which will boost your score, but if you close the account you are essentially taking away all of that available credit, so your score could actually decrease as a result. If you are worried you may still use the card once it’s at zero, you can always cut up the card and still keep the account open.
Don’t Apply for New Credit
When you apply for loans, cards, etc., having your credit pulled is known as an inquiry, and while it may only reduce your score by a few points, having too many credit inquiries on record could give lenders the impression that you are looking to charge up your accounts, so it is best to only have your credit pulled when you are certain you are going to go through with the account, and that you don’t plan on continuing to open accounts afterwards.