12 Months to Better Credit and Lower Interest Rates

Written By Mary Beth Eastman
Last updated June 21, 2019

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July 27, 2018

Simple. Thrifty. Living.

A better credit score is one way you can take control of your financial health. Often, people assume that if they have imperfect credit there’s not much they can do to improve their rating. In fact, there are steps you can take to demonstrate you’re a good risk for lending agencies, which means better interest rates and the potential to refinance your existing debt.

Many people have several credit cards. Your credit score takes into account how many cards you have and how many of them have balances. So, if you have small balances on a few cards, it’s a good idea to pay those off and only use one or two. That way, the scoring algorithm will see you have, for example, two cards out of eight with balances instead of six out of eight.

Your amount of available credit is also important. Try to never use more than 30 percent of your credit at any time. It seems strange, but the rule basically is the less credit you need, the more lenders are willing to provide. So, if your overall available credit is $10,000 and you typically only use under $3,000, you are in good shape.

If you are still having problems with your credit score, you can use one of the top credit repair companies to help you repair your score.

An on-time payment history improves your credit score. Budget and plan your expenses so your utilities, credit cards and installment debt are paid on the due dates. Over 12 months, you’ll demonstrate you are conscientious about your debt. If you need encouragement, check your credit history on a periodic basis. Some platforms will list every on-time payment, so you’ll be able to see you are making progress.

Typically, debt is one big charge or loan you are paying off over time. If you are given a good interest rate at the time you borrow that money, it costs you less in the long run. So if you plan on a big purchase, like a car, give yourself time to build up your credit rating before signing off. With a better score, you should get better terms, leading to more available cash and debt that’s easier to pay off. When you pay off that debt, your credit score continues to improve.

Sometimes it may feel like you can never overcome negative marks in your credit history, but your recent activity matters. You can make huge strides over 12 months just by making small changes to your spending habits. In the end, it will make it easy for your to stay on solid financial footing. You may even find yourself upgrading to the best credit cards for your credit score once you’ve achieved your goal.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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