Whether you have bad credit or no credit, the following tips will help you to improve your credit score without getting caught in the credit trap.
I have been slowly rebuilding my credit after a few bad decisions, and some major life setbacks. To find out more about how I’m paying down my debt, check out my post on The Debt Snowball.
While getting rid of debt absolutely helps to increase your score, this process may seem slower for some of us because we still have to wait on our next paycheck to make our next payment. In the meantime, here are a couple of things that I do to help my credit simultaneously.
Here’s the Tip: Use a secured credit card for GAS only (or some other bill that is a relatively constant amount) - A secured credit card is pretty easy to get because your limit is based on the amount of cash (money) you deposit to ‘secure’ your line of credit.
I would also recommend ‘securing’ your card with 3.5 - 4 times more than your monthly gas expenses; this is to ensure that you keep the credit utilization on this card below 30%. For more information on why this percentage is important, check out my post on Understanding Your Credit Score 101.
I do not use more than about $100 in gas per month, which of course could be a vastly different amount for someone else, so my ‘secured’ amount is more than $400. However, here is the most important part:
I ONLY use the amount that I BUDGET for gas each month.
For more tips on effective budgeting, check out my post on Budgeting.
This way the money that is ‘charged’ to my credit card monthly, is equal to the amount of cash in my account that was already budgeted for gas. This is important because it means that when the bill arrives, I can pay the ENTIRE BALANCE of this card every month. See my post on Understanding Your Credit Score 101 for more information on how this helps your score.
Sounds simple right? Well it really is that simple. Most of the ‘magic’ behind the basic steps to financial freedom is a wealth of self-discipline. Tell yourself that you’re going to do it, and then take the steps necessary to get there.
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