Inflation is a double-edged sword when it comes to personal finances. For one thing, it lifts the cost of nearly everything you need to buy, from groceries and dining out to gasoline and consumer goods. But with the Federal Reserve raising interest rates to combat inflation, it also means that the cost of credit is rising as well. If you have any outstanding credit card debt, for example, the already-high interest rate you were paying has been steadily moving up in 2022 and may continue to do so into 2023. If you’re looking to take on new debt, such as an auto loan or a home mortgage, those rates are rising as well.
The only way to combat this is with a better credit score, which can get you a lower rate. But how can you quickly bump up your credit score during the inflation economy? Here are a few steps you may be able to take.
Pay Off Your Debt
If you have outstanding credit card debt and the cash available to pay even some of it off, it can help your credit score. The biggest factors in your credit score are your payment history and the amount of debt you have. While paying on time will incrementally help your score, reducing your debt offers the biggest bang for your buck when it comes to raising your score rapidly. Reducing your debt may also give you some leverage if you ask your credit card issuer to lower your interest rate.
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Ask For Higher Credit Limits
An important part of your credit score is your credit utilization. This is the percentage of your available credit lines that you are currently using. For example, if you have a credit limit of $10,000 and you have $5,000 in outstanding debt, your credit utilization is 50%. To lower your credit score, you should try to reduce your credit utilization below 30%. Ten percent or lower is even better in terms of improving your score.
Take Advantage of a 0% Balance Transfer
Transferring a balance to a different credit card won’t usually improve your credit score, but it could improve your cash flow. With most credit cards charging a 15% interest rate or more — with some rates running over 20% — snagging a 0% balance transfer card could stop your balances from rapidly rising, allowing you to pay them off faster. This, in turn, is the best way to quickly boost your credit score. If nothing else, a 0% balance transfer card will lock in that rate, typically for 12 or even 18 months, allowing you to avoid any interest rate increases.
Check Your Credit Report for Errors
Hard as it may be to believe, many credit reports have errors in them. In some cases, the error can be enough to lower your credit score. For example, if you closed a credit card but your report still says it is open and past due, then your score may be ruined through no fault of your own. It pays to take a look at your credit report regularly, especially since you can access it for free online.
Spread Out Your Balances
If you’re not in the position to pay down any of your balances, see what you can do about at least spreading them out among your cards. Although part of your credit score is your total credit utilization, how much you use of each individual card also plays a role. For example, if you have a low overall credit utilization but one of your cards is maxed out, your score will suffer. But if you can move that balance to other cards and keep each card’s balance at under 30%, that will help your score.
Become an Authorized User
If you have relatives or friends with good credit histories, you can piggyback on their records by having them add you as an authorized user to their account. While you won’t be legally responsible for paying back any charges on the account, the credit history of the card will show on your report. This could instantly boost your score by a significant amount. Of course, you’ll have to find someone willing to add you to their account, as they would be legally responsible for any charges you may add. You’ll also suffer the consequences of their bad habits if they suddenly stop paying their cards or run up significant debt. But if you have a good relationship with someone who you trust and you are willing to be responsible with their account, this could be a quick way to pump up your score.
Get a Credit Boost
If you’re looking to boost your Experian credit score, you may consider signing up for Experian Credit Boost. This service allows you to add on-time payments for services such as utilities, telecommunications and even Netflix to your credit report. Just as on-time payments on your credit accounts can boost your score, so too can these service payments. But any increase to your score would only hit your Experian report, not your TransUnion or Equifax ones, as only Experian currently offers this service.
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