What's your credit score? Are you struggling to even reach 650? Well, it is time to get your stuff together. You are most likely losing a lot of money by paying higher interest rates on your credit card or mortgage. Talk about waste! You might as well be taking out a percentage of your paycheck and using the cash for starting your fireplace. No one has fireplaces anymore, but you get the idea.
I am in the 800 club, as I like to call it. I have not yet achieved that so much desired score of 850, but I'm getting there. I'm going to tell you how to get there with me.
- 1. Get a Job:
No kidding, right? I include it here only because of how very important it is. You can't improve your credit score without financing. The good news is that you don't have to be Bill Gates. If you really care about raising your credit score, you can make progress even while making around minimum wage. I did. I worked at an amusement park, Wal-Mart, then as a waiter, but my credit score steadily went up. Yours can too; you just have to be very careful with the next steps.
- 2. Get a Credit Card:
But for God's sake, exercise extreme caution. Most credit cards that are readily available to low-credit individuals are available for a reason. You will pay heavy interest in exchange for the credit card company's lack of trust in you. High interest is a real killer, especially if you don't immediately pay off your debt. Before I married my wife, she fell into this predicament. She had maxed out two credit cards, totaling $2,000. While this may not sound like much, neither of us made much over minimum wage at Wal-Mart. She could barely make headway on her balance because of the nearly 20% interest rates. In the end, each of her $50 pairs of jeans, which she bought on credit, ended up costing well over $100 after paying off her cards. That said, a credit card is still one of the fastest ways to build credit. Just be smart about it.
Luckily, there are options available to people without great credit ratings. You can often get credit cards with lower interest rates, if they have lower credit limits. The lower interest rates are offered because there's little risk for the credit card company, if you can't borrow much. These are even more advisable, because you shouldn't be looking to use your credit card heavily anyway. Look for these credit cards at franchised companies that offer their own credit. I found my first card at American Eagle. It was perfect. It had the best interest rate that I could find, under 10%. It had a low credit limit, $500, so I couldn't get too far in debt. And finally, it was at a clothing store, which was great, because I don't care about clothes! I only shopped there after I ruined shirts. It greatly prevented overuse of the card. (My wife, on the other hand, loves clothes. She probably should have gotten her card from Auto Zone.)
The point is, always keep your primary goal in mind with your card, building credit. Wherever you get your credit card from, don't start using it for convenience. Use a debt card for that. I would even recommend that you lock up your credit card at home, and only take it out for special occasions.
- 3. Pay Your Bills:
Sounds obvious, doesn't it? But if you don't pay a single bill, most companies are more than happy to report you to the credit bureau for your financial irresponsibility. That's right, missing a single payment. Just one of these dings can do damage that will take years to correct. The trick to staying on top of your bills isn't to be rich, either. Just ask Terrell Owens. There are two real keys. The first is to make a responsible schedule to pay off your bills. A budget planner can work wonders in this area. I use www.mint.com . But there are many alternatives. Find a budget or plan that works for you and stick with it!
The next key is to live within your means, especially on long term financial commitments. Don't purchase a car that will take you fifteen years to pay off. Your economic situation could change a lot in that time. I have never purchased a car that took me more than a year to pay off. I'm not going to lie; I've had some clunkers. But I've also got a solid credit score.
In theory, this credit thing isn't that complicated. But it still gets people in trouble all the time. I've tried to remain somewhat vague, so that you can be flexible with these points. However, if you follow this advice, you will come out with a solid credit score too.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
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