When you take a look at your finances and where you stand, it is not long that you start looking at your credit score to get an overview of your money management skills. That three digit number serves a multitude of purposes when you are already managing your own budget. Just like how it was in college when your grades tell you how well you are doing in class, your credit score will let you know how well you are doing in real-life financial management.
People take several routes to get their credit score in sterling condition and in the higher averages of things. There are those that are just starting to build their credit score while some consumers are rebounding from a financial mess. There are also a lot of others who are waging their own small or big financial battles just to get their credit scores up.
This is not an easy thing to do for a lot of people primarily because they do not have an idea what makes up their score. They do not even know the items that they need to factor in when trying to improve their scores. Some pay their bills on time but take out loans left and right causing hard pulls on their scores by lenders. There are also some consumers who recklessly cut down on the number of their credit cards starting with the ones that holds the most financial history.
But in the overall scheme of things, FICO.com is actually happy to report that their survey points to improving credit scores for majority of the consumers. There are now 19.9% of consumers who has scores 800 and up which is an increase from 19.6% half a year ago. Plus, there are fewer people who has scores south of 550.
But this does not mean that people should relax and not pay attention to their finances because the lack of accountability can be that single factor that starts an avalanche of problems that gets you in the red with bad scores. You need to continuously stay on top of your budget and money management regardless if everyone is getting better at it. In fact, use it as a motivation to increase your score.
Habits that are hurting your score
One of the things that you can do to help your credit score is to be aware of the common mistakes that you can make against your finances and score. It is best to have an idea what these are to be able to manage your actions and expectations in the future.
- You are grossly underpaid. The issue of minimum wage is a sensitive one and New York found itself in the center of it all as Gov. Andrew M. Cuomo decided to increase the minimum wage in the fast food sector. But this is not just as problem in New York as NYDailyNews.com shares that about 42% of workers in the country are underpaid. Getting a lower salary may not directly affect your score but the inability to meet your financial obligations due to a tight budget would dip your score. If you are in this situation, you need to look for ways to increase your income to meet your budget requirements.
- You set financial matters aside. One of the items that you need to look into is focusing on your finances because there are a lot of people who just brushes this aside thinking they can get to it at their leisure time. Financial matters are not something to be taken lightly and relegated to secondary matters. You need to prioritize your finances and put a lot of effort into making sure that your income is utilized to meet your expenses and save for future needs.
- You have a disorganized approach. There are people who defends their lack of order with the way they do things and sees it as organized chaos. They know where everything are or at least the general vicinity of the things they need. You cannot use this approach because your finances should be treated as an exact game down to the last dollar. You know how much you are making and how much your expenses are. You know the interest rate and how your savings will accrue and compound over time so you know how much you will have at a certain point in the future. There are things that are hard to forecast just like what happened to the stock market in the past months but the best you can do is to be able to account for your funds to know how you can manage your score.
- You let other people drag you down. One of the best examples of this is when you just instantly agree with requests that you cosign loans for friends and even family members. It can be a grandkid or even your own child in need of a private student loan and needs you to cosign that loan with a private lender. If they are consistent with the payments that that helps improve your credit score but it they start missing on payments and eventually becomes delinquent or default in the payments then your score gets affected as well. You need to bear in mind that it took you years to build up that score and one wrong decision can bring it down.
- You refrain financial talks with your spouse. When you want to save money on a date with your spouse, the best way to go about it is to talk what your activity will be. Movie and dinner or lunch at the park. If you can talk about a date, you should be able to talk about your finances and how you can work together to keep your credit scores up. See how you can manage your debts and lower your expenses down while simultaneously increasing your income. When you support each other, it is easier to reach your financial goals.
Ways to increase your income
One of the things you can focus on is to look at some ways to increase the income. This can have a positive effect and help you as you try to increase or maintain your credit score.
- Invest in self development. There will always be room for improvement and if you want to be better at what you do, you can consider taking up short courses or even graduate school. But the thing is that you usually need to spend when you want to get better. You might not be spending money because of all the free information in the net but you will be putting in a much more important resource – your time. Be sure to use your resources wisely to reach your goal.
- Do not be afraid to ask. Check with your HR or even your direct supervisor how promotion works in your company. If you do not qualify yet, you at least have an idea what it takes to get to the next level. This is because if you never ask and play the waiting game, you might already be missing out on possible increase in your pay.
- Nurture that entrepreneurial spirit. If that dream of putting up your own business still bugs you then you might want to get started with that dream. If you are having problems with raising your capital then you can consider crowdfunding to raise up your capital requirement. It also serves as great feedback mechanism to check how potential customers warm up to your products or business ideas.
If you are aiming to increase or improve on your credit score, it will help to know some of the potential pitfalls that you might encounter along the way. This allows you to see what problems lurk along the way and make preparations to steer clear of these mistakes.