Learning finance

4 Ways To Get Creative To Fix Your Credit Score

The very mention of “credit score management” can cause many of us to panic. Your FICO credit score measurement is calculated based on an ever-evolving algorithm that seems to favor only the finest and most punctual of us. Managing this number well is essential to achieving financial independence. But without a clear strategy and an understanding of how credit scores work, a credit report can seem like a dark secret waiting to hijack your future. It’s even more difficult when businesses and lenders, who rely on FICO scores to make decisions about loans and interest rates, contribute to the confusion in put in small print it may go against what you are trying to establish.

While we might be tempted to try and beat your credit score, you can’t hide from it forever. Eventually, you’ll need it – and that would be better. But just because credit scores involve formulas and paying bills, doesn’t mean we can’t come up with creative solutions to understand how they work and use that knowledge to our advantage. We asked credit experts and financial planners how to rethink the credit rating conundrum.

First step: make peace with the past

An unspoken cost of bad credit is the emotional energy you spend to feel bad about it. Part of the fear of managing your credit score comes from knowing that you will have to deal with irresponsible expenses, debts, or missed payments that have damaged your score. The upside, however, is that it’s normal. Ashley Feinstein Gerstley, Silver Coach and Founder of The tax woman, recognizes that many people feel this way. “A lot of times we’re ashamed of our own spending habits, so we avoid facing them. It can become a horrible cycle. The key to forgiveness is to gather a little compassion for ourselves and understand why we are where we are. “

Unless you have a large trust fund or other extensive financial safety net (and sometimes you even have one!), Chances are you’ve made choices about debts that you still pay off. . Gerstley has some wisdom on this as well. “When we understand how difficult money can be, it is much easier to forgive ourselves. Money is something we can’t avoid – most of us haven’t learned it, we can’t talk about it because it’s taboo, and we give it a lot of power because it is a tool for getting and experiencing what we want in life. “It’s time to understand how past spending decisions have affected your score. Use CreditKarma.com, Mint.com, or a credit card app to see where you are at. Make a deal with yourself to own it and move on.

A woman receives financial advice

Step two: seek responsibility

When it comes to your FICO score, you don’t get extra credit for determining everything on your own. And while no one is as invested in your personal credit score as you are, that doesn’t mean you have to go it alone in your quest to achieve a near-perfect score. Find a finance guru, whether it’s your best friend who knows how to gamble with travel points on her credit cards or your savvy retired aunt who has been able to live her best life on a fixed income for 15 years. Be honest with them about your credit score and ask them to help you stay responsible.

If there isn’t a Zen-level credit score expert in your life, consider seeking professional assistance. Talking with a credit repair specialist, calling the person who does your taxes, or asking for a consultation with a mortgage loan officer costs nothing (or next) and can save you the frustration of guessing what to do next. Reaching out to build a relationship with your bank’s local branch doesn’t hurt, either. Not only can a national bank be a valuable source of advice (and a loan when the time comes), brand loyalty can mean handing over late payments when you go over your account or miss a deadline.

Bethy hardeman, Chief Consumer Lawyer at Credit Karma, advocates the value of speaking with a real person at your bank when you make a mistake. “Request a ‘lifeline’ from your bank. If you’ve made a late payment, pay your bill as soon as possible, then call your lender. They may be willing to take it as a fluke and help you by waiving late fees or keeping a late payment off your credit report. You can also call to ask for a lower interest rate, a higher credit limit, or a different due date.

A woman pays a bill online

Step three: automate everything

Once you’ve made a commitment to improving your credit, you’ll find that on-time payments can cover a host of financial sins. Automating the bills you need to pay, like utilities and freight charges, can mean you’ll never make a late payment again. Vice President of Mortgages, Guaranteed Rate Mortgages Jennifer beeston agrees that moving away from manual payments is essential. “Automate each invoice so that at least the monthly minimum is paid five days before the due date. Always try to pay off your cards at zero each month. If the prospect of disputing errors on your credit report seems daunting, you can automate it as well. CreditKarma.com will file a dispute report on your behalf if you cite a valid reason for a late payment, such as a change of address or a banking error. Once you file the dispute, it is usually resolved within 60 days without any further action from you.

How many credit cards should you have anyway? “Ideally, you want three credit cards,” Beeston shares, “and you want to use them each month for small amounts and then pay them off.” Do not wait for the expiry of the monthly payments on your cards. Contributing small amounts to your account balances throughout the month can improve the appearance of how quickly your line of credit “renews” and also make you a prime candidate for credit increases.

Maggie Johndrow, a financial advisor for Farmington River Financial Group, put it this way: “[Payment history and amounts owed] makes up 65 percent of your credit score. So if you make your payments on time and don’t have large balances, you should have a good credit score. It’s as simple as that. And even if you’ve made a lot of late payments in the past, don’t give up hope: every payment made on time will count towards increasing your on-time payment average. This means that each month you have several opportunities to reduce the impact of these late payments on your score. While you’re at it, set up an automated transfer to your savings account to get you one step closer to a healthy financial future.

A woman is planning her budget

Fourth step: play for the strong

We cannot repair or improve our credit scores overnight as much as we would like. Write down your ideal credit score and a financial goal it will help you reach. Then, determine your next steps by critically thinking about what you already have going for you. If you’re living up to your student debt, for example, your credit history might actually benefit. “A lot of kids don’t realize that student loans, as long as you’re in good standing with them, can actually improve your credit score! Johndrow encourages. “It provides the payment history on a loan. She also reminds us that keeping the books we already have is vital. “Don’t close your credit cards,” she warns. “While you might think it could help improve your credit health, closing your credit cards could actually negatively affect it. To create credit, show that you are responsible for the credit you already have.

If you have a lot of credit card debt, realistically assess how you’re going to pay it off and #dothedangthing. Accept that there is probably no fairy godmother who comes to intervene on behalf of your credit card to the maximum. While it’s never fun to throw your money on old debt, try to treat yourself to small rewards when you hit debt milestones, like paying off a card in full.

Getting out of debt is difficult, but not impossible. Once you realize that having a bad credit doesn’t make you a bad person, you’ve confided in a mentor, and you’ve taken the simple, proactive first step of automating your bills, you are ready to make a long-term plan to work the credit card system in your favor.

Share your best credit score hacks with us on Twitter @BritandCo.

(Photos via Getty)