If you plan to apply for a loan in order to make a major purchase, such as a new home or car, you should aim at improving your credit score and reducing your debt. A credit score is a three-digit number that creditors and lenders use to help determine your loan eligibility and how likely you are to repay them on time if they decide to grant you a loan or a credit card. According to the credit bureau Experian, six in 10 Americans have a good (670 – 739) or better (740 – 850) credit score. However, if you are just starting out as a borrower and do not yet have a strong score, here are some tips for building your credit score and managing your debt in the process. 

Don’t Miss Your Payment Due Dates

Your credit scores can be negatively affected when you pay your bills late or settle an account for less than what you initially agreed to pay. In addition to general loans, auto loans, student loans, and credit card bills, late payments for utility, rent, and phone bills can also reduce your credit score. Therefore, you must ensure that all your payments are on time.

Piggyback on Good Credit Habits

Becoming an authorized user will help you improve your credit score significantly. For instance, you can ask a family member with a good credit score to add you as an authorized user to their credit card. Financial research reveals that, if you have a lower credit score of under 550, being added as an authorized user can improve your credit score by 10% in just a month.

Keep Tabs on Your Credit Utilization Rate

Your credit card provider may deem your card inactive and shut it down if you leave it unused for long. As a result, your overall available credit may decrease, increasing your utilization rate significantly. That’s why credit utilization is among the most crucial categories that influence your credit score.

Credit utilization also plays a major factor in calculating credit risk. Using over 30% of your available credit lowers your credit score since it raises a red flag to credit card companies that there is a greater risk that you will not pay it all off or that you may take longer to settle it. Therefore, you should weigh your balances relative to your credit limit. This strategy will help you to ensure that you are not using too much available credit and accumulating a mountain of debt.

While these tips may take months for you to see a noticeable impact on your credit score, the only way to reduce your existing debt is to either pay it or settle it. Such a task can be difficult for most borrowers who don’t understand how to navigate the process of debt settlement. Fortunately, there are professionals standing by to show you the way out of debt. 

Get Help Managing Your Debt

The debt management professionals at Progressive Debt Relief can help you get closer to the light at the end of the tunnel by negotiating with your lenders and creditors to reach a reasonable and manageable settlement on your debt. For more information about our debt relief services or to set up a free consultation, contact us today at 877-590-1847.