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Published on August 13, 2018

How to Improve Credit Score Quickly with These 10 Tactics that Work

How to Improve Credit Score Quickly with These 10 Tactics that Work

It’s been months since you’ve tried improving your credit score but had little success. And since you’re planning to make large purchases soon, you start feeling hopeless.

The problem is you don’t know where to start. With too many resources available, you become paralyzed with fear. But you know you can’t sit still forever. So what’s your next step?

To learn from others who’ve already experienced success.

Take my case, for example, my current credit score is 750+, but this wasn’t always the case. At one point I had no credit and lost over 100 points. Through trial and error, plus learning from others I’ve learned which tactics work.

You don’t need complicated strategies, you only need a few that work. The tactics provided in this list are the same ones I’ve used to increase my credit score. While your credit score won’t improve overnight, it’ll improve quicker than most.

Here are 10 tactics you can use to finally improve your credit score:

1. Revise for any errors

Before you attempt to improve your credit score, check where you stand. Pull a free credit credit report and ensure that all your information is accurate. For example, check for misspellings, wrong addresses and accounts not belonging to you.

If there’s any bad information, contact the credit reporting company. To avoid any prolonged issues, aim to check your credit at least once per year. You’re entitled by Federal law to 1 free credit report from all 3 credit reporting agencies.

Download Credit Karma, or Credit Sesame to track your credit score. This will help you stay motivated as you’re changing bad habits to improve your credit score.

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2. Stop depending on credit

A major reason for having bad credit is due to carrying several credit balances. Instead, focus on paying down all your credit cards and only use one. Save money by consolidating all your credit card balances into a 0% interest credit card.

Once you’ve consolidated all or most of your credit card debt, make more than the minimum payment. Why? Because it can take years for you to pay off those balances making the smallest payment.

It can feel overwhelming keeping track of many credit cards and other expenses. Fortunately, a simple solution is to use apps like Mint to better track your cashflow.

3. Say no to new credit cards

Ironically, the better your credit score is, the more credit offers you’ll receive. But this doesn’t mean that you should open dozens of new credit cards. Limit yourself to only have 1 to 4 credit cards.

If you find that you already have more than 4, focus on eliminating ones you don’t use or have an annual fee. Many companies and stores will try to convince you to open new credit cards with a one-time cash bonus. Don’t fall for it.

4. Leave your bills on autopilot

Because you’re human, you’re bound to be late on payments at some point. A great way to avoid being late is by setting up automatic payments for your bills. Nowadays, most large banks have a “bill pay” feature that allows you to set up recurring payments.

Review your credit billing history and write down bill due dates on a separate sheet of paper. Be sure to have a good understanding of your cash flow to know how much money you’ll have left over each month. Use the remaining amount to make extra credit card payments.

Stay motivated by setting a deadline for when you’d like to be credit card debt free. Then break down your entire credit card balance by month. For example, if you’d like to be debt free in 16 months with a $5,000 credit card balance, make a $313 payment each month ($5,000/16).

Make sure to pick a date that’s attainable and one with payments you’ll be able to afford. It’s better to pay a lesser amount if you’ll be consistent.

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5. Make your bills adapt to you

Everyone’s pay cycle is different, so adjust your bill’s due date to a date convenient for you. If your bill is due on the 1st of the month but you get paid on the 7th, change accordingly.

Sometimes changing your due date is too much of hassle or not possible. In this case, consider using your credit card to make your payments.[1] But, as soon as these payments post to your credit card, be sure to pay them off.

6. Be wary of excessive credit

Keep your credit utilization below 30%. Using more credit gives the impression to companies that you’re struggling financially. Vintagesscore recommends using no more than 30% of your credit utilization.

What’s your credit utilization? Divide your total outstanding debt by your total credit. For example, if you had $3,000 in outstanding debt with a $10,000 credit limit, your credit utilization is 30%. Now review all your credit cards and calculate your credit utilization.

So when do you use your credit cards? Only to make purchases you’ll be able to pay off either immediately or within a month.

Stop depending on your credit card to make daily purchases and use your debit card instead. You’ll be less likely to make impulsive purchases and buy only what you can afford. The best part is you’ll start breaking the bad habits that got you a bad credit score in the first place.

7. Don’t abuse credit inquiries

Be wary of hard credit inquiries. These types of inquiries can bring down your credit score a few points. A few points may not sound like much, but they add up.

Hard credit inquiries are necessary for the different stages in your life but you’ll need to be strategic for when to use them.

Here are some examples of hard inquiries:

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  • Auto loan application
  • Mortgage application
  • Student loan application
  • Personal loan application
  • Apartment application

Plan ahead for big purchases. This way you’ll avoid running many hard inquiries against your credit all at once. The good news is that big purchases aren’t made often, so you’ll have time to prepare.

Set a timeline for when you’d like to make large purchases to know if your credit score is in good standing.

8. Become an authorized user

Start building credit by becoming an authorized user in someone else’s account. As an authorized user, you’ll be able to make purchases with your own credit card. But the owner will still be responsible to make payments on time.

It’ll be challenging to find someone who’d be willing to add you as an authorized user to their account. So start by asking a close relative or friend. Once added, it’s a great way to build creditworthiness over time, so be persistent.

9. Praise your credit history

Don’t close good standing credit cards. Good standing credit cards show lenders you’ve been able to make payments on time for an extended period.

Instead, if you decide to no longer use a credit card, leave it home somewhere out of sight.

Do close credit cards that are charging you annual fees or have a short history. Be sure to do this during a period you won’t be making large purchases.

10. Conquer goals with patience

The truth is building your credit score won’t be easy, but it’s well worth the effort. To stay motivated, write down your main reason for wanting to improve your credit score.

For example, if you want to buy a house, set a concrete date to work towards to. Then start researching what credit score you’ll need to buy your home. From here, break down your goal into daily actionable steps.

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A sample month can look like this:

  • Week 1: Leave credit card at home
  • Week 2: Call banks to inquire about ideal credit score to have
  • Week 3: Create a pay off date for your credit card with the lowest balance
  • Week 4: Save $10 to make a principal payment towards your credit card

Consistency is key. It’s best to start with small goals and make consistent progress. Once you start seeing success aim for bigger goals.

“Most people overestimate what they can do in a day, and underestimate what they can do in a month.” – Matthew Kelly

Make your dream purchases effortlessly

Imagine waking up to a buzzing noise. It’s your smartphone notifying you that your credit score is now 700. You smile, grab your coffee, and start your morning feeling invincible.

It wasn’t easy but with hard work and discipline, you were able to improve your credit score.

Best of all, your finances are now better than ever. You have a budget and stick to it. Amazing isn’t it?

You now have 10 proven strategies to boost your credit score. Try each tactic but remember to have patience. Increasing your credit score won’t happen overnight. But you’ll form life-changing habits along the way.

What are you waiting for? Go get em’ tiger.

Featured photo credit: Pixabay via pixabay.com

Reference

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Christopher Alarcon

Content Marketer and Finance Analyst

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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

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