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We finally made it to 2020. If you’re starting to evaluate where you’re at financially and consider what the next ten years will look for, you’re not alone! Whether it’s a house, a new car, a dream vacation, or maybe even continuing education – your credit score will likely come into play.
According to the FICO credit scoring model, a good credit score is anything above 670. Scores above that range can give you access to better loans or credit card options with better interest rates. However, you should always be striving for the maximum credit score of 850.
Remember that you’ll likely have many different credit scores available to see online, due to the various ways your score is measured by different models. Here we give you a couple of different ways to work on your credit in 2020.
5 Easy Things That Can Help Fix Your Credit in 2020
Especially if you’re young and just starting out building a career, or maybe just have a weak credit history, it’s probable that your credit score is in the poor to the fair range. A low credit score could affect the rates you get on a home loan, whether or not you get approved for a place to live and more. Long story short, it’s important that you’re taking steps to improve your credit score.
If used correctly and in conjunction with these other tips, a personal loan that is reported to the bureaus can help your credit score. Positive activity that gets posted to credit bureaus can help your score over time. There are a variety of different methods to work on your score, and personal loans are only one of them.
Limit Your Debt to Income Ratio When Borrowing
A really crucial component in your score is how much debt you have compared to your credit limit. This is called your credit utilization ratio. This new year, try to make it a goal to reduce any high-interest credit card debt first since that likely is costing you more money in interest than maybe an auto loan would. When you decrease your credit card balances, it shows potential lenders that you’re responsible with credit. Experts suggest keeping your credit utilization ratio below 30% of your credit limit.
Personal loans can be one way to help improve your credit, but we recommend borrowing the absolute minimum you need to meet your goals. Smaller loans will have smaller monthly payments. No matter what, you want to limit your debt to income ratio.
Keep Making Payments on Debt
Maybe it’s too obvious, but it’s really important to keep making payments on the debt that you have. Even if you do get a small personal loan and get a little caught up, make 2020 the year you don’t let them get behind again.
We also recommend that you don’t stop using your credit cards altogether. Keep using them but pay them off as quickly as possible. Start establishing good credit habits and increase your score and help you stay on track.
Create a Budget – And Stick To It!
It’s really important that you know your budget. Sit down and establish how much money comes in and out every month. Having a budget in mind and knowing where your money is going can help you make smarter money decisions.
Take time this year to create a budget and give yourself a plan for how much to save and how much to spend. This can help you make better decisions when you’re tempted to use a credit card. It also shows you what a loan payment would need to look like to fit your budget.
Set Up Automatic Payments
When credit bureaus are looking at how to score your credit, they look at payment history first. You can help protect your score and avoid the penalties that come with a missed payment by putting all of your bills on autopay. First, make sure that you have enough money in your checking account to cover each bill each month so that you can avoid overdrafts. When you know that you’re making on-time payments each month automatically, you won’t have to worry about sudden score dips.
Fixing Your Credit Score Takes Time
Before you take out any loan, make sure that you know what you’re signing up for. Look for a lender whose process is easy to follow and transparent every step of the way.
Ready to fix your credit score in 2020? If you do borrow, try to line up your payments with your pay cycle, and set up payment reminders to help you stay on track.
There’s no quick fix, and nobody can promise you a certain score. Keep at it, and you’ll be working towards a better score and a more healthy financial future.