If you want to build a good financial reputation - otherwise known as a good FICO score - you'll have to make the effort to bring your spending in line with your income.
You have two simple choices, and they should be used in combination with each other: - Earn more and use the extra to pay down debt - or stop going further in debt - Spend less
Start with earning more. How many extra dollars per week or per month would it take for you to begin paying off credit cards? $10, $50, $100, or maybe $500?
Remember, even an extra $10 per month paid on a credit card account will make a difference over time. This is a simple example, because it doesn't take into account that the money will be paid in a little at a time and will begin reducing the amount of interest you pay from the first "extra" payment onward. Your savings will actually be more than the following example.
But look at it this way: If you're paying 18% interest, and you pay an extra $10 monthly for one year, that's $120 less that you'll pay interest on the next year - That's $9.60 per month, or $115.20 per year that won't slide out of your checking account into the hands of a credit card company.
So how can you earn that extra money? Here are a few suggestions: - Take a part-time job in addition to your regular job. Here are a few that could easily bring in an extra $10 or $20 per week without taking up much time: o Put up and take down signs for a real estate agent o If you're good with a camera, take property photos for that agent o Walk dogs for a neighbor who works long hours o Pet sit for people on vacation o Clean offices at night or on the week-end o Hire on to shop or do yard/garden work for an elderly neighbor o Do on-line blogging for pay o Do on-line surveys for cash - Begin doing extra tasks at work - take on more responsibility - work a little harder and longer than anyone else - and then ask for a raise. - Begin looking for a new job that pays more - Go through the attic and start clearing your clutter - through eBay - If you can write, sign up on a site like Helilum.com and enter the writing contests - Put some Google Adwords links on your own web pages - Teach a class about something you do very well
The most important thing is to immediately set aside all funds generated from these extra activities - and use them to pay down debt. It won't help you if you increase your spending to match the additional income.
Let me start off by saying that understanding how the three major credit bureaus arrive at your credit score is one of the most powerful pieces of knowledge you can have. Most likely this is not something that you have ever been taught. In fact, when it comes to your credit scores, the three major credit bureaus, Equifax, Experian, and Transunion, run sort of a "black box" operation.
I will do my best to keep simplicity in mind as I explain what makes up your credit scores:
35% - Payment History Your history of paying your bills (on-time, late, etc.). The largest factor of your score.
Credit Utilization 30%: The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.
Credit History 15%: How long your accounts have been open. Longer more established accounts are more positively weighted than newer accounts.
Credit Inquiries 15%: Whenever you apply for credit, an inquiry is registered on your credit reports. If you get too many, it can have a negative effect.
Type of Credit In Use 10%: Type of accounts, and number in use. Mortgage loans are the best, and finance company accounts are the worst.
Ok, now we have some powerfull knowledge. It's time to put it to use with 2 things we can do in about 30 minutes to increase our credit scores...
Increase your credit limits: This is actually easier than you think. It is truly remarkable what will be granted to you simply for the asking. What I want you to do is simply call each of your credit card companies and ask them to increase your credit limit. One technique you might also use is to tell them you are doing some financial house-cleaning and are considering getting rid of the card and using one with a higher limit and better interest rate, unless they can give you a better offer. In my experience, I have found this to be successfull 100% of the time.
As an example scenario, let's pretend that you have a credit card with a $5,000 limit, and a balance of $4,000 (80% utilized). You make a 10 minute call and get you limit increased to $6,500 which means now you are only 62% utilized. Much better, and immediately, your scores increase. Now we can do even better, which brings us to the next technique.
Bring your balances down! Let's continue from the above example where you are now 62% utilized on your credit card. If you were to pay down $750 on this card, you could bring the balance down to $3,250 on a card with a limit of $6,500, and that would put your at 50% utilized. Now not everyone has the ability to pay more than the minimum payment on their cards, and that's ok, you have already raised your scores. However, at 50% utilization, you will be able to maximize your scores. Now imagine if you did this on all your credit card accounts. Now, consider this... If you could raise your scores and get a better interest rate and lower monthly payments on a mortgage loan, or auto loan, you could save thousands over the life of that loan.
These are very powerful techniques. I have seen this work for clients time and time again. One client recently was able to raise the credit limits on 3 credit card accounts and raise their scores by 105 points immediately.
Bear in mind that these techniques are recommended to those with a clean credit history. Credit card companies are more willing to work with those that have an established history of making payments on time. If you have negative items on your credit, perhaps a more aggressive credit repair approach is more appropriate.
Both Mike Clover & Jon Ochs are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jon Ochs has sinced written about articles on various topics from Free Credit Report Score, Credit Cards. Jon Ochs has over 12 years of experience in the credit and debt field and is the founder/CEO of . You can learn more about establishing new good cred. Jon Ochs's top article generates over 14800 views. to your Favourites.