5 Tactics to Improve Your Credit Score This Year

Published on: 03 February 2022 Last Updated on: 12 September 2024
Improve Your Credit Score

Inflation is up, money is tight, and your credit score is in the gutter. What a way to start the year!

Instead of wallowing in self-pity, it’s time to finally do something about your unfortunate credit score. This January, kick-off an improvement plan to improve your credit score by the time the clock strikes midnight on Dec. 31.

5 Lucrative Ways Improve Your Credit Score: 

5 Lucrative Ways Improve Your Credit Score: 

1. Know What You’re Working With

You can’t fix a problem you can’t see. If you’ve been avoiding checking your credit score for fear of what you’ll find, get over yourself. Now is the time to set aside your pride and review the damage. Your credit score impacts nearly every financial move you make. Working to improve it now, before you consider shopping for a major purchase, can make your life easier.

Pull up your free annual credit report to review the data that’s been reported to the credit bureaus. If you’ve got missed payments, high credit utilization, or too many accounts, take note. Then consider your overall score. Anything under 700 should be seen as an opportunity to improve. Now you’re ready to create your action plan.

2. Take Action Daily

You can make measured improvements on your credit score just by being mindful of your daily actions. If you struggle with overspending, pause before you swipe your card. Consider whether the purchase you’re about to make meets your goals and if you’ve got the money to repay the balance.

If the answer to either is no, resist the urge to buy. Instead, save up for want-based purchases so you can treat yourself without sacrificing financial security.

In an e-commerce age, you probably can’t eliminate plastic from your purchasing repertoire entirely, but you can be smarter about it. Familiarize yourself with different payment options like a credit builder card. These cards are secured by a funds transfer or initial deposit. Every time you pay your bill, your good payment history is reported to the credit bureaus. Over time, this great track record can improve your score.

3. Get Your Budget on Point

The way you spend often dictates how well you can keep up with the demands of your bills. While everyone has core expenses across housing, food, and transportation, it’s essential to manage one’s variable expenses. Sit down with the last two months of your spending history to identify budget busters and trends you’d like to address.

If dining out is a sore spot for your budget, create a system to help you indulge with purpose. Set a dollar amount that you can spend without dipping into cash reserves dedicated for other expenses. Think about why you like to spend in this category and whether there’s another way to fill your cup.

If your real desire is to spend time with friends, pivot to hosting a small potluck dinner once a month. Adjust your spending toward this event, and you just may find you like the results better than gathering at restaurants.

4. Dispute Inaccuracies

Your comprehensive credit report may be telling lies about you. If your careful review identifies inaccuracies in your report, it’s in your best interest to dispute them. Late payments are one of the biggest dings on your credit report. If you’re a reliable payer, it’s only fair to fix any errors in your report.

First, reach out to the company reporting the information to the bureaus to dispute your account status. Then report the error to the credit reporting bureaus. You’ll need to include a dispute form and documentation supporting your case.

This process can take months to resolve, so stay the course on other credit-boosting activities while you wait. Inaccurate reports happen, so it’s important to review your credit report regularly so you can quickly address them.

5. Attack the Two Most Impactful Credit Factors

Put your energy into the most impactful parts of your credit score: on-time payments and credit utilization. Your payment history drives 35% of your credit score. If you have a history of late payments, you’re killing your score. Catch up on missed payments and create a system to help you manage your bills. Set up autopay for your core bills (rent/mortgage, utilities, insurance, etc.) so you can ensure that your obligations are covered.

The second most impactful area of your financial behavior is credit utilization, which makes up 30% of your score. Credit utilization — the percentage of your available credit that you’re using at any given time — signifies how well you manage money. Work to keep your utilization below 30% to earn a good mark from the credit bureaus.

If you can, request a credit limit increase to improve that percentage, but resist the urge to tap into it. Consider making payments toward your balance as you make changes to keep your utilization low.

Creating the Accountability to Stay on Track

Creating the Accountability to Stay on Track

Any goal is more achievable when you breathe life into it. So create a vision board of your credit score goals and post it where you can see it daily. Talk about your plan with your friends and family to create an accountability team for your new credit-building habits. Monitor your progress regularly and course-correct if you need to.

The more you interact with your plan and assess your behavior, the more likely you are to be successful. Who knows? After a year of hard work, sacrifice, and intentional effort, your score could even climb from poor to exceptional.

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Needing A Small, Short-Term Loan "I need a small amount of money quickly for a short-term need. What’s the best option?" Best Loan: American Express Business Loan It provides small, fixed-rate loans with a quick approval process, which is ideal for short-term financial needs. Related: How To Use An SBA Loan For Business Purchase Eligibility For Small Business Loans You might find the best loan provider. However, when it comes to eligibility, rejection can be common.  Regarding personal loans, good mortgage lending (a property that you place as collateral when taking the loan) makes loan acceptance easier. However, when it comes to business loans, the rules are a little different. The loan lender (bank or private) must closely investigate your business expenditure, cash flow, and profit margin. If you do not have a steady personal and business credit score (unless you are building your business from scratch, in which case the rules will be different), getting your small business loan approved can be challenging. Do not worry; this is not to scare you. However, ensure you take the time to investigate your and improve financial health. Here are some of the absolute eligibilities when it comes to small business loans. 1. Your Business Needs To Be Nonprofit Unfortunately, you cannot have a nonprofit organization and demand a small business loan. Your business must be making some profit through a steady income. 2. A Lucrative Business Idea, Aka The Cash-Flow Since business loans do not depend on collateral submission, lenders are mostly concerned about the business idea. Most importantly, is there a demand for such business in the market? Will there be enough opportunities to build a steady cash flow? Is there any stock market share for businesses with the same ideation? The loan they offer you will depend on the potential profit you can make from that base. Plus, it must be backed by solid data. 3. Your Credit Score Although we have already mentioned the credit score for each loan provider, you need to be serious about your creditworthiness. Any loan provider will scrutinize your personal and business credit score. Any suspicious activity (including something as simple as an unpaid credit card bill) can put you under the radar. Eventually, it does not make you a good candidate for a loan. In other cases, your business credit score also plays a crucial role. What is your total business income? Is it holistic with your business expenditure? What is your business credit card transaction history? Are you able to balance your bills alongside your monthly operational costs? ...and many more. You must submit all your financial documents, especially if you are planning to expand through different business locations and real estate. How your business funds are handled becomes crucial in such a case. Secured & Unsecured Loan Starting a business? Want a small business loan? Then, you should understand the importance of collateral in such a business. Most importantly, do you even need to submit collateral to get your loan sanctioned? Secure business loans will charge you some collateral (cash money, real estate property, gold bonds, etc.). Meanwhile, unsecured loans do not charge any collateral. Which is better as Small Business Loans As someone just starting a business, I know the advantages/disadvantages of both kinds of loans will depend on your criteria and loan amount. So, let’s discuss the overall pros and cons of both! Secured Loans Let’s begin with the kind of loans that require collateral. Pros ConsLower Interest RatesLonger Approval RatesHigher Loan Amounts (because of the collateral)Risk of Losing AssetLonger Repayment Period (you can elongate your loan repayment term for two decades)Not everything can be collateral. It, after, depends on the bank. Unsecured Loans Now, let’s talk about loans without collateral. ProsConsYou Need No CollateralAutomatically, the maximum loan amount is less.Quick Loan ApprovalHigher Interest RatesFlexible for all types of loansThe repayment period is a short When Should You Get What? For the ease of your own understanding, here is when you should get what! Secured Loans Might Be Better If You need a larger loan amount. Can provide valuable collateral. You want lower interest rates and longer repayment terms. If your business has significant assets that can be used as collateral. Unsecured Loans Might Be Better If You do not have assets to offer as collateral. Need funds quickly. You prefer not to risk losing business or personal assets. The business needs a smaller loan amount. You can check the listicle above for a good idea of which secure/unsecured small business loans would be better for you. Types Of Small Business Loans These are the types of small business loans which you should investigate: Term Loans: You borrow a set amount and pay it back over time with fixed payments. SBA Loans: The government backs these loans, giving you good terms for your business. Business Lines of Credit: You get access to a credit line like a credit card. Invoice Financing: You can get cash based on your unpaid invoices. Equipment Loans: This loan helps you buy business equipment. Merchant Cash Advances: You get an advance on your future credit card sales. Microloans: These small loans are often given by nonprofits to help you start. Commercial Real Estate Loans: Use these loans to buy or fix up your business property. Personal Loans for Business: You can use your personal credit for business needs. Franchise Loans: These loans help you start or grow a franchise business. The Final Note! The choice between a secured and an unsecured small business loan ultimately depends on your specific needs and circumstances. a secured loan might be more suitable If you have valuable assets and prefer lower interest rates. On the other hand, if you need quick access to funds and prefer not to put up collateral, an unsecured loan could be the better option. Always consider the terms and conditions carefully and consult a financial advisor to make the best decision for your business. Things to remember before you get a small business loan: Have a solid, chalked-out plan for how you will repay it. You wouldn’t want to lose your collateral. Do not take hasty loans because you have fulfilled a business milestone. Remember, a loan is not a temporary fix; it is a debt for years to come. Therefore, be careful before sanctioning a loan. Finally, be candid about your financial decision. Keeping it discreet to get a quicker loan approval will only cause you trouble later. What do you think? Should getting a small business loan come after so many considerations, or should it be a little easier? Do let us know in the comment section below! Read Also: Core Banking Solutions: A Game Changer? Alternative Business Financing – What Is It And How Do You Do It? Ways To Apply For A Personal Loan & The Reasons To Opt For This Loan.

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