Your credit scores can have a major impact on several areas of your life. These scores, which are calculated from the information in your three credit reports, determine where you can live and which loan terms you receive from lenders. Credit scores can even affect the type of job offers you receive.
If you have poor credit scores, the good news is that they are not permanent. You can always adopt new personal finance habits to improve your credit scores. The following personal finance habits may help you achieve this goal.
- Pull your credit reports often. Pull your credit reports as often as possible. You can pull your reports from Equifax, Experian and TransUnion once per year for free. However, you should try to pull these reports twice per year at a minimum. If you are able, try to pull your credit reports once every four months. Look for mistakes, signs of identity theft or areas where you may be able to improve (such as by paying off old debts).
- Avoid overspending your credit. Credit utilization is a major factor for determining your credit scores. You should try to avoid spending more than 30 percent of your available credit. If you overspend, lenders will see you as someone who is more likely to fall behind on payments. Your credit scores will take a negative hit. You should also avoid opening too many lines of credit.
- Sign up for automatic payments. Most of us have multiple bills that come due each month. You should pay your credit cards, student loans, utilities, car insurance, car payments, rent or mortgage on time each month to improve your credit scores. Forgetting these payments will hurt your scores. Many services allow you to enroll in automatic payments. If you can ensure the funds will be available each month, then automatic payments will keep you from forgetting to pay your bills.
- Save up for an emergency. Financial emergencies can strike without warning. Medical bills, job loss and car repairs could cost thousands of dollars. An emergency fund can help you pay these unexpected bills. If you recently received a tax refund, then you could use it to start an emergency fund. A good rule of thumb is to have an emergency fund that can pay for a minimum six months of expenses.
- Maintain a budget and keep track of expenses. You should create a detailed budget that outlines your existing and future expenses. An unexpected bill or expense could jeopardize any progress you have made towards improving your finances. A budget could also help you find ways to lower your existing expenses. Money saved from cutting your expenses could be used to pay down your debts, which could improve your credit scores.
It is vital to continue practicing responsible personal finance habits. Even if you receive a bill that knocks your credit score down, it is important to stay positive. Continue to make progress on improving your scores.
Questions About Debt Relief or Student Loans? Contact Our Kansas City Bankruptcy Attorneys
The Sader Law Firm is a Kansas City bankruptcy and student loan law practice. If you have questions about debt relief or student loan payments, we are here to help. You can reach out to us by calling (816) 281-6349 or by using our online case review form.