Norma Gomez, a financial coach at Mary Rigg Neighborhood Center, shared a few uncommonly know ways to help you build your credit.
Often, people associate credit cards as a negative factor on your credit score, but did you know you can use them to raise your credit score too? Norma Gomez, a financial coach at Mary Rigg Neighborhood Center, shared a few uncommonly know ways to help you build your credit.
Pay your full balance by the due date
If you only charge what you need and what you can afford to pay off at the end of each month, paying your full monthly balance when it is due should be easy to do. This will keep you from paying interest. Another benefit is that, when you carry a balance, it can have a negative impact on your score because it increases the amount of credit utilization ratio (amount of using versus what you have available). Ideally, you want to keep your credit utilization ratio below 30%.
Track your credit card spending like a debit card
It can be very easy to think that credit is extra money and “I’ll just charge it and pay it later” is a very common mindset. By tracking your spending, you are going to be more aware of how much you are spending. Remember, the goal is to pay the full amount off at the end of the month and not carry a balance.
The 15/3 payment method
There is some theory that making your payment several days before the statement date will lower your credit utilization rate. Here is how it works:
- Take your credit card statement and find the payment due date
- Count back 15 days before that payment is due
- Pay half of the payment on that earlier date
- Count back three days before your payment is due
- Pay the remaining balance on that date
While this method hasn’t been confirmed by credit report agencies, if it does, great. But ultimately, what it can do, is allow you to budget two smaller payments instead of one larger payment – and ultimately still paying your full balance each month.
Keep accounts open
Our friends at nerdwallet tell us that:
“The longer you use credit, the more predictable you are to lenders. So, the sooner you open a credit card and start using it responsibly, the better. And keep your accounts active and open… Every time you open a new credit account or close an old one, it lowers the average age of your accounts, which can hurt your credit score. The length of your credit history accounts for 15% of your FICO score.”
Remember, by using these tips and the more you build your credit, you are more likely able to get a loan for larger things like a house or a car. If you need any help applying these tips to your budget and rebuilding your credit, please contact a Mary Rigg financial coach at 317-639-6106.