Managing your credit — credit cards and your credit scores in particular — can seem so confusing and even a little scary.
You don’t want to do anything to hurt it, but it seems like even the smallest wrong move can hurt your credit score. (Plus, it is so hard to know what a wrong move is, when even just having a high current outstanding balance can hurt it.) And even the smallest ding on your credit could affect the rate you get, or worse, if you even get the credit card or loan.
Besides the clear alternatives to raise your credit score like paying down debt and disputing any inaccurate or incomplete activity, you can improve your standing in the major category of Amounts Owed, which represents 30% of your credit score, and even in the 35% Payment history, as we will be ensuring the credit due are paid on time.
If you use your credit card during the month and don’t pay it off before the statement is issued, that statement balance will be reported and show as “Amounts Owed” on your credit report, thus reducing your available credit and increasing your debt utilization.
BUT in a recent interview for the Money Makers Academy with Gerri Detweiler, Head of Market Education for Nav.com, the only site to give small business owners their free business and personal credit scores, she shared a quick hack to help reduce the impact of your credit card debt and thus raise your credit score before you apply for credit.
Here’s how the strategy works:
1 – You CAN still use your credit card during the month.
2 – Then 5-7 days before your statement end date, pay off a significant chunk of your balance, say ~80%. (You will be paying for your current charges in a few weeks anyway, so this is helping your credit card serve a bit more like a debit card, but you still get the rewards or cash back of a credit card.)
3 – When your outstanding balance is reported to the credit bureaus once per month, only the much lower amount shows up, thus showing a positive impact on your available credit and payment history.
Remember that the top item to affect your credit score is On Time Payment History, so let’s make sure you are current and paying all your bills on time. If you want some help to highlight your unconscious spending and then find the money to pay your debt off faster, you’ll love my Money Making Tracking Templates – free to you today at: www.OwnYourMoney.com/track.
What you don’t know can hurt you in this world of credit, so let’s put YOU in the know!
Belinda
Belinda Rosenblum is a CPA and Wealth Expert who helps you take charge of your money. She believes life is supposed to be fun, and money is supposed to fund it for you! Belinda left her thriving corporate finance role to found OwnYourMoney.com and lead a movement to change our entire perspective on money – from a source of fear, shame, and judgment to one of joy, ease, and confidence. Belinda is the founder of the Money Makers Academy and coauthor of SELF-WORTH TO NET WORTH: 12 Keys to Creating Wealth Inside and Out, offering a step-by-step approach to help you build your financial self-esteem and manage your own financial life. If she’s not talking about financial freedom, Belinda is likely enjoying the sunshine and chasing after her marathon-running husband and 2 small kids.