Your friends seem to be able to afford whatever they wish. You, with a budget that allows only a very limited amount of fun, just can’t figure out how they do it. The fact is, there are a few things they may do that allow them a better credit score:
- Payments on time, and more than the minimum
- No new cards
- Rotating cards
- Keeping purchases within budget
- Monitoring credit scores, and
- Paying back bills
Nothing that you don’t think you’re doing, right? But take a closer look, and make sure you are actually not making problems for yourself. The best way to a better credit score is self-honesty, and looking at the finances, when you are not under exceptional stress, is a good place to restart.
These are the two areas where credit can get out of control so easily. Making only the minimum payment does avoid problems, but it also keeps the debt alive as long as possible. If you make the minimum payment, plus even a few dollars more, you will reduce the fees, and the length of time that you have that debt. Start with the largest interest charge first. If you can, add extra money to another charge that is close to being paid off.
Not using your cards to the maximum means not only smaller payments, but you have a cushion of credit if there is a sudden need for car or home repair. Making charges that you are positive that you can pay off, in full, every month is a sound way to better credit.
Credit scores are calculated on the amount of credit you have available. A card with a high limit will affect your score negatively if the account is closed because it isn’t used for a long time. Keeping cards, that you are sure you can pay off, in rotation will help keep your better credit rating. You are showing that you can handle having large amounts of credit, without overdoing it.
Patience is a needed thing, when trying to build or rebuild a credit score. Paying off debts, especially those that have gone to a debt collector, will help rebuild credit. Adding the payment amount to another debt will quickly bring you to a point where you have many fewer debts. This will allow you to start a better credit habit. If you save the funds you have been spending on back debts, you will have a savings account that you can build on. You have not had that money available, so there is nothing you need give up to save.
Applying for new cards is not a good idea, unless there is a solid financial reason to do so. The old card stays open on your credit report, increasing the amount of credit you have available on paper. The new card looks at your credit report, and sees how much credit you have available, and what you have done with it. If you apply for new cards, because all of your other ones are at their limits, you will do double damage to your score, with both the higher payments possible, as well as inquiries into your credit worthiness on record.
How long has it been since you looked at your credit score? There are several places to get a copy of your score, as well as an annual free credit score report. Some cards now offer a monthly look at your credit score, making it easy to spot any financial activity that is questionable, and get it taken care of. This can be a long process, so catching any errors quickly will save you effort in the long term, as well as insuring better credit for you now.
Even if you don’t see it, your friends may have been quietly saving for months to afford a larger down payment on a car, or for the vacation that you envy. Being able to plan in advance is one thing a budget should allow you to do, and your friends may have given up something that you can’t see to be able to afford these luxuries. Better credit planning will insure that the payments these items cause are not barely affordable, but can be easily fit into the budget with either the larger down payment, or the savings for specific items.
One other thing
Your friends may not have the best of credit! They may be living without a budget, closing their eyes to the consequences of not saving, and building a pile of debt that will take years of hard work to pay down. Your impression of their credit scores may be influenced by things that actually will hurt them in the long run. Better credit isn’t a contest, but something you do for yourself, and your future.