The holidays can do a number on your credit score. Between unexpected expenses and predictable holiday splurges, you can make decisions that lower your credit. You put everything on plastic, maxing out your limits to keep up with the season.
A bad score can interfere with your life in many ways, complicating how easily you get a personal loan or affordable auto insurance.
Here’s some good news: you don’t always need a good credit score to borrow money online. The requirements to qualify will vary from bank to online direct lender to FinTech platform.
That said, good credit doesn’t hurt. If your score is high enough, it can unlock more favorable rates and terms.
What Can You Do to Turn Your Score Around?
Given how a good score can improve your life, focusing on improving your score would make for a good New Year’s resolution.
So, let’s shift the focus away from your holiday-inspired mistakes and concentrate on what you can do to undo them. While progress may not happen overnight, you can improve your score by following these tips.
1. Make Every Minimum Payment
The minimum is the least amount of money you have to pay to avoid line fines.
- For installment loans, the minimum is your pre-determined, fixed, and scheduled payments.
- Your credit card and line of credit minimum can often reflect your usage, so it might fluctuate from one billing statement to the next.
Always pay these on time. Paying your bills by the due date is one of the most important things you can do to build good credit.
Why? They either add positive payment history to your file or deflect late payments, depending on how your creditor shares your account history with the major credit bureaus.
2. Cut Down on Spending
This tip is easy to follow on the other side of the holidays. Once the festivities are over, you don’t have to worry about gifts, travel, and all the other expenses that come with the season.
Reverting to your usual spending habits may not be enough. You may need to look at your typical month’s expenses to see what else you can eliminate.
Reducing your discretionary spending is the easiest way to free up cash. For an extra challenge, figure out how to spend less on your essential bills.
3. Choose a Payment Style
Once you free up extra cash in your budget, determine where you should spend it. The two most common debt strategies differ in scope.
The snowball method recommends you pour all this extra cash into the account with the smallest balance. Research shows that following this method makes you more likely to stick with your debt goals. That’s because you are more likely to pay off your first loan this way and feel successful enough to continue.
The avalanche method involves spending your extra cash on the account with the highest interest rate. While you may not get a quick win this way, it does reduce what you accrue. As a result, you will save more money following this option over the snowball method.
4. Talk to Creditors
If you find it hard to make the minimums, contact your creditors about financing options. You might be able to refinance payment sizes or reschedule due dates with their help.
You might also want to talk to a credit counsellor, even if you are managing your minimums. These professionals can refine your debt strategies to reflect your unique situation.
Repairing credit isn’t easy. Get help where you can!