Savings and Credit Repair: How to Redistribute Your Cash

Savings and credit repair go hand-in-hand. Resources in the forms of time, money, and credit score points will aid your financial stability and keep your reputation in fighting form. For those pursuing credit repair, acquiring the skills of budgeting and saving are imperative. Along the way, keep the five factors of credit scoring in mind and use your newfound abilities to conserve and redistribute funds. Deliberate planning leads to deliberate results.

• Payment history and debt

A cash surplus can breathe new life into a flailing credit score. The ability to cut back on everything from monthly food costs to inflated bills will add to your bank account and provide instant flexibility. Utilize your financial leeway by focusing on payment schedules and overall debt reduction for credit cards and other revolving credit balances. Save more money by paying down those cards before associated interest accrues. If you carry a mountain of revolving debt, reduce your credit utilization ratio by setting an end goal and increasing your monthly payments. Remember that credit scores are highly impacted by how maxed out your cards are.

• Credit length and inquiries

Living conservatively is wise when money is tight. That said, an influx of cash could help you dust off old accounts and reactivate a stalled credit report. Help your score by using your oldest account to make a purchase. For example, if you are working on a home improvement project, use your credit card to charge the supplies and pay the bill before any interest accrues. Similarly, avoid the negative effects of new credit inquiries by utilizing your existing accounts in creative ways. Call your creditors and ask for a limit increase. The results will yield an instant improvement in your credit utilization ratio and a bump in your credit score.

• Diversification

Rejuvenate the final 10 percent of your credit score by broadening your horizons. If your credit report is sparse, use liquid savings to invest in an affordable and practical purchase. Consider the following example:

The Emory’s are searching for a new sofa. They find a suitable model for $1,200 at a local store. Although they could write a check for the balance, they apply for a store line of credit instead. Thanks to zero percent APR for the first year, the Emory’s are free to pay off the sofa in monthly installments. The result is a positive citation on their credit report and a responsible spending strategy.

Take a lesson from the Emory’s and allow your savings to work for you. Ask yourself how everyday spending can improve your credit score, and use your assets accordingly.

Credit repair strategy is rarely cut-and-dry, but employing the basic principles will help you make metered and wise decisions. Focus on savings and positive distribution. Good credit is an achievable goal.