As we rang in the new year to greet 2021, we also said goodbye to a year that felt like it would never end. 2020 brought so many challenges and hardships with it, including an onslaught of financial difficulties for many. From recessions to furloughs and layoffs, many people were left with no jobs and few financial options. For those who have lost their jobs, bills can pile up fast. From monthly bills like rent and utilities to essential purchases like groceries, it’s especially difficult to make ends meet. This can lead to purchases and payments being put on credit cards, or even missed altogether. In the long run, this can and will negatively impact your credit score.
And even though it may seem like you don’t have any options, not all hope is lost.
The good news is that there are some simple steps you can take to bolster your credit score, even during times of financial difficulty. And while none of these recommendations can guarantee you instant results, or even a higher score, they are prudent steps that can help you to get a better handle on your finances.
Ready? Let’s get right into it.
Check Your Credit Score
The first step to managing your credit score is knowing what your score actually is. Many people fear that checking their scores will actually lower them, but avoiding it can actually be harmful for you in the long run (for more on this, read on here). Luckily, ScoresMatter makes it easy to check your credit score! Many people don’t know where to begin when trying to track down their credit scores, which is why we’ve made it simple. We offer credit reports and scores, including tools designed to help you manage your digital and financial footprint. Checking your score periodically can be beneficial in the long run because you won’t be able to see how you’ve improved if you don’t check!
Strategically Attack Your Debts
This one may seem like a no-brainer, and we understand that everyone might not be in a position to immediately put money towards a debt, there are two general strategies for paying off debts you should be aware of. The first is the avalanche method. This strategy involves making the minimum payments on all of your credit cards except the one with the highest interest rate. Then, put as much money as your budget will allow into that higher interest rate card. The idea here is that your card with the most potential interest gets paid off first, saving you a lot of money down the line.
The second strategy is called the snowball method, which is a little different. For this method, all of your credit cards get the minimum payments except the credit card with the lowest interest rate. The strategy behind this one is to get cards paid off as quickly as possible.
Limit New Credit Applications
This one may seem like a no-brainer, but taking out new lines of credit can be especially tempting during times of financial hardship. Many credit cards are bundled with offers for gift cards and store credit, but they usually come with a high cost in the long run. Your credit score is affected by how many lines of credit you have open, how much of your credit you utilise, as well as how frequently you are paying off your balances. So if at all possible, limit your applications for new credit until you can get your balances and score in a more manageable place.
If you absolutely can’t avoid it, space out your applications at the very least. If your back is against the wall and you need finances in a pinch, the temptation to furiously apply for a lot of credit at once can also arise, which appears as a red flag for many lenders. So keep that in mind before opening more cards.
We hope these quick tips and tricks will help you to bolster your credit score, especially when times get tough. Check back in next week for Part II!