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101 Powerful Tips for
Legally
Improving Your Credit Score
General Good Financial
Habits Build Good Credit Scores
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Your credit score in some
ways is meant to be a snapshot of your overall financial habits
- especially your habits surrounding debts and other financial
responsibilities. Developing some good financial habits can
help your credit score by putting you in a good financial
position.
Good financial habits will
ensure that you don’t get into too much debt and that you are
able to meet your financial duties easily. There are a few
financial habits that are especially credit-friendly:
Tip #40: Learn to budget
One of the biggest reasons
that people develop poor credit is overspending. In many cases,
this overspending is caused by a lack of budget. A budget can
tell you how much you should be spending on each item in your
life. This allows your financial life to stay nicely
organized.
Contrary to popular belief,
a budget does not have to be constricting or boring or
complicated. Simply note how much you earn each month, and on a
piece of paper, write down how much you really need to spend on
savings, rent, utilities, food, personal care, transportation,
spending money, entertainment, hobbies, education, and other
items. Make sure that you account for every expense.
Then, simply commit yourself
to spending that particular amount on each item on your list.
Of course, some expenses on your list will change each month -
you may spend more on heating bills in the winter than in the
summer, for example - but estimating can help ensure that you
can meet all your financial responsibilities.
Tip #41: Live within your
means
Many people believe that if
they only had more money, they would not have to worry about
credit. In fact, this is not true. Many people who have money
- or at least have all the trappings of money, including cars
and nice homes - in fact have terrible credit.
The secret of this is that
it is not your income that decides whether you are a good credit
risk or a bad one but rather how you handle money. You could be
earning $7 per hour and still paying your bills and meeting your
financial responsibilities - in which case you will have
terrific credit.
You could also be earning
$300 000 a year and be in terrible debt and financial shape due
to unpaid bills and excessive debt. The best way to ensure that
you have a good credit rating - no matter what your income - is
to spend less than you earn. That means living below your
means. If you have a very small income, you may need to live
with roommates in order to keep costs down. If you have a
medium-sized income, that may mean saving more and entertaining
less.
You may be interested to
note that your income is not a factor in determining your credit
score. Although your past and current employers are listed on
your credit report - and although lenders may be able to guess
your financial status from your loan amounts - your income does
not count.
This means that if you won
the lottery today or suddenly inherited a large sum, your credit
score would not increase. With your credit rating, what matters
is how you manage your money, not how much you make.
Tip #42: Get out of the
spending habit
We are surrounded with
advertisements that tell us to buy, buy, buy. When we want to
read a book, we buy it. When we want to go somewhere, we take a
cab or drive rather than walking.
Stopping spending
consciously can be hard, but heading to your local library,
walking instead of taking a car, buying a used computer instead
of a new one - all can help you spend less and save more. There
are several ways you can save money and pay off your debts
faster by spending less:
1) When you head out, carry
a small amount of cash with you and leave your credit cards at
home. That way, you will not be able to overspend.
2) Stop catalogs from
arriving at your house or discard them unread - advertisements
and catalogues encourage you to spend and buy when you don’t
need to.
3) Do it yourself. Eat in
rather than dining out. Dining at restaurants or getting food
delivered is always more expensive than doing your own cooking.
Also, do your own taxes rather than farming the job out to
someone else. Wash your own car, run your own errands, mow your
own lawn. When you do something yourself, you spend less.
4) Watch less television.
It sounds strange, but television can make you overspend -
television contains many professionally-created advertisements
pushing us to spend and spend. These ads are so well done that
not spending after watching them is sometimes very difficult
(just what advertisers want!). Switching off your television
can help you avoid temptation.
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