The need for credit repair rarely arises overnight. A poor credit score usually results from months or even years of repeated mistakes. Don’t waste time by placing yourself into a difficult situation. The best credit repair strategies begin with prevention. Avoid the blunder below to keep your credit score in fighting condition. That three-digit number is more powerful than you think.
1. “I’ll just charge it and pay it off later.”
Aren’t credit cards convenient? Can’t afford that item? No problem! Just charge it and pay it off in smaller increments. Credit card debt would be perfect without the double-digit interest rates. Living on credit means paying more for items over time, resulting in a never-ending drain on your budget. Stop using credit as your personal piggy bank. Consider the value of the things you buy with interest attached. For example, a $19.99 DVD may seem like a small expenditure, but you’ll be paying nearly $25.00 with a 22% interest rate attached. Why fork over the extra cash? When used correctly, credit cards can add to your financial strength and increase your buying power. Keep your credit utilization ratio in check and use your cards as a tool rather than a liability.
2. Living at the limit.
Budgeting is the best way to live within your means and keep your credit score safe. So, why is yours falling short? Effective budgeting begins with realistic numbers. Consider the following example:
Last fall, Mariah began her credit repair journey by creating a budget. She allotted $55.00 in monthly income to electricity costs. Three months later, her budgeted money vs. actual expenditures was off by 15%. Mariah failed to factor in the added cost of winter heating when she estimated her electricity expenses.
A solid budget accounts for varying circumstance and flexible costs. Estimate the maximum cost of each bill and give yourself some breathing room. Worst-case thinking allows you to cover even the most inflated bill without threatening your ability to pay. Zero-balance bills equal a healthy credit score. Practice some preemptive credit repair by keeping your bases covered.
3. Brushing off the cost of late fees.
Speaking of payment abilities, succumbing to late fees is the expressway to bad credit. You may think nothing of paying an extra $10.00 in late fees, but the credit bureaus view your carelessness from a different perspective. Payment history accounts for 35% of your credit score. The more late payments you accumulate, the further your credit score will fall. Bad credit equals high risk, a quality few lenders will overlook on a loan application. Late fees add up to more than a few dollars and cents. Take your reputation seriously by paying your bills in full and on time. You wouldn’t trust an unreliable source; keep that in mind the next time you ask the credit world to trust you.