If you want to have access to quality products on the lending market and not be restricted financially in general, you need to have a good credit score. It’s one of the fundamental concepts of living in our modern society, for better or worse. And while some people are quite careless about their own scores, you should not treat them as a guide for your own behaviour. You should always be striving to have a good credit score to the best of your financial abilities.
Unfortunately, sometimes your financial situation might make this a challenge. It can be hard to think about improving your credit score when you are barely making ends meet and are turning to loans in the first place. But you have to put your mind to it and force yourself through that difficult situation, because otherwise your problems are only going to get worse in the future. Building a proper credit score when you’re on a limited budget is difficult, but certainly not impossible. You just need to set your priorities straight.
Limit All Possible Expenses
First of all, consider where you’re spending your money and think about any expenses that can potentially be reduced or even cut out completely. Even if you think that you’re already living on the edge, you’re probably not entirely right about that. Make a list of all your expenses and go through it carefully – you will probably notice at least one or two opportunities for optimization in there.
Remember, many of those budget cuts are something you’ll only have to live with temporarily. Once you’ve improved your credit score and have climbed out of your bad financial situation, you’ll be able to resume your regular lifestyle and enjoy all your previous habits.
Plot Your Budget
On the note of making lists, you should have a clear overview of your budget. An income/expenses balance sheet is a good start, but you can take it one step further with the help of modern technology. Look into plotting your budget in Excel or a similar tool. With just a few clicks, you can present your financial information in a way that’s much easier to parse at a glance. This can be important when you want to make sure that you’re optimizing every cent of that money, and that you’re moving in the right direction. Watching the plot evolve over time can be a motivating factor in itself.
Use Your Credit Cards
Credit cards can contribute a lot to a good credit score when used right. As long as you always make sure to pay off your balance on time and don’t delay anything, you can expect to see some nice contributions to your score over time. So if you have a credit card – or more than one – available, you should use it as much as possible during this time in order to maximize the benefits for your credit score.
The only thing that’s important to keep in mind here is that you should be very responsible about making those payments on time. Otherwise, you’re going to see the exact opposite effect, and your credit score is going to go down over time. It can be even more difficult to climb out of that hole once you’ve dug yourself deeper in, so be careful. It doesn’t even take that much to find yourself in a situation like this, as these problems can stack up fast.
Prioritize Repaying All Pending Loans
If you have any lines of credit open at the moment, you should make it a priority to take care of them as quickly as possible. This will not only help improve your financial stability in the immediate sense, but it will also contribute positively to your credit score. The longer you keep those lines of credit open, the worse they’re going to affect you in the future. So make sure that you’re making those payments on a regular basis, and that you aren’t forgetting any important loan if your list is long enough.
Also, once a loan is paid off in full, talk to the creditor to ensure that it’s properly marked as resolved. It can occasionally happen that a lender might forget to communicate the situation to the right institutions, which can put you in a bad place if you decide to pull up your credit report for a new loan one day.
Keep Your Score High After Improving It
Once you have your desired credit score, you might think that you’re done. Far from it though – the story is just beginning. You now have to make sure that you maintain all those positive habits you’ve developed while improving your score, and keep working on it as much as you can in the future. You should never relax about this – you don’t know what might happen tomorrow that may require you to take out a large loan. And the better your credit score is when something like this happens, the more options you’ll have at your disposal in general.
Improving your credit score doesn’t require you to have a lot of money at your disposal. It’s just a matter of building the right habits and sticking to them in the long run. It also requires a good deal of education about the way the financial system and the lending market work. Taking your time to learn those things can make a huge difference in the kinds of situations you find yourself in the future with regards to your finances.