Financial Habits To Improve Your Credit Score

Financial Habits To Improve Your Credit ScoreYour financial habits can be a big factor on how you accomplish your goals in life. This is because in every decision you have to make, money will usually play a big part in it. From the college you go to up until the work and the life you want to have, your finances will always be a consideration. In line with this, your credit score becomes an integral part of major life decisions as well.

If you are planning to buy a house, one of the factors in your mortgage loan would be your score. The same goes for auto loans and even credit card applications. In all these, lenders would put a lot of weight on your score. According to Newsweek.com, the average credit score for Americans is at about 695. An improvement from the past years but you can certainly do better.

This is where your financial habits come in and make the difference. The daily financial decisions that you make can have a significant effect on your credit score. From meeting your payments to closing accounts, they all have a part to play in your overall financial standing. The way you handle multiple debt payments or your decision to consolidate loans can affect your credit score.

Your financial habits will dictate how you make everyday financial decisions that is why it is important to keep them in check. Here are a few things you need to consider to help you manage your finances better.

Stick to your payments

FICO.com shares that consumers that are considered to be high achievers in terms of their score follow a simple rule – common sense credit practices. These are the people who are able to lock onto a score north of 750. This can start with simply meeting your payments every month. Take a look at your budget and keep tabs on your payment due dates.

One way making sure you do not miss your payments is to set alarms and schedules with whatever platform you are comfortable with. You can use an actual diary you write on and carry with you all the time. You can choose to set alarms on your smartphone to help remind you of your payment dates. There are also mobile and desktop applications that you can download to help you manage your payments.

Consolidate your debt

Another way to help you stay on top of you payment schedule is debt consolidation. It helps streamline your payments and allows you to manage fewer financial details. Take for example having to make payments on five different credit card lenders every month. This can mean five different payment due dates, five different payment amounts, as well as different rates.

One way to help you with payments and improve your financial habits is to consolidate all those debts into one card. Preferably, it would be great to put them on the card with the lowest interest rate. This can help you save money down the line as you pay smaller amounts every month. It can also help you combine all those details under one account making it easier for you to remember your payments.

Refinance for a lower amount

This is similar to what you do with your credit card consolidation. The difference is that you get to choose the card with the lowest rate. There are even some 0% introductory offers on cards which you can take advantage of. Outside of credit card consolidation, you can look into refinancing your other loans to have better payment terms.

This would work best if your credit score has improved from the time you actually took out the original loans. If you have been paying close attention to good financial habits, your score would definitely benefit from that. A better score means a lower interest rate which equates to lower monthly payments. Just be aware that there is a possibility that you end up paying more at the end of your repayment period is stretched out over a long time.

Regularly check your credit report

Your credit score is a direct result of what is contained in your credit report which is a manifestation of your financial habits. If you have a habit of missing your payments, that will be included in your credit report which will then reflect over to your score. With this in mind, it would make sense to regularly check your credit report.

This is because there is a possibility that errors exist in your report. There can be times as well where questionable transactions show up in your report. Checking your score can help you fix these errors as well as get to address privacy issues immediately. FTC.gov shares that The Fair Credit Reporting Act or FCRA gives consumers the right to get a free copy of their credit report from nationwide credit reporting companies once every twelve months.

Here is a video to understand the The Fair Credit Reporting Act better

Practice due diligence is one of the great financial habits to consider

Apart from checking your credit report, practicing due diligence in various financial transactions can also help you improve your score. Doing it often can also integrate it into your financial habits. There are a lot of things you can do to help guard your finances. Just like when you are using your card to pay for a purchase in a store. You need to make sure that you keep track of where it goes to prevent identity theft.

You also need to make it a habit to keep your private information safe, especially when shopping online. Never give out your personal details as well as your card information to questionable sites. These can be a phishing site meant to use your data for their own good. They are made to look exactly like legitimate sites in an attempt to fool you.

Use credit card wisely

One of the financial habits that will help you improve your credit score is to be in control of your credit card use. Most of the time, how you use your credit card is part of how you have seen your parents do it in the past. With this, it is safe to assume that children pick up credit card mistakes from adults. You not only improve your score when you watch your card spending, you also impart valuable financial lessons for your children to emulate.

This can be as simple as making sure you only charge what you can pay off at the end of the month. You also need to understand how to properly read your monthly statements. You might be simply looking at the minimum payment amount every time. Do you know where the fees and penalties are listed down or even your interest rate?

Avoid letting go of old accounts

One of the biggest mistakes you can ever make that can harm your credit score is closing old accounts. The problem is that you sometimes make this mistake with the best intention in mind. As you aim to streamline your funds, you close those that you are no longer using. You might make the mistake of cutting up your oldest credit cards or closing down old accounts.

Computing for a credit score considers a lot of factors and one of them is your payment history. That is where you old accounts would come in handy as it would reflect the longest proof that you are paying down financial obligations.

Taking on good financial habits can help you improve your credit score and overall financial standing in life. You just have to know where to get started and keep at it until you see results.