How to Easily Boost your Credit Score Right Now

The holidays are here, and that’s no big surprise.

The shock comes more so from the wish list that you fulfilled and how that affected your bottom line, specifically the money that you spent, overspending that potentially occurred.

That spending spree isn’t just about adding debt, which for most is a rite of passage for the holidays, but also how that debt is going to affect your credit score.

Shoppers are all about spending over the holidays, averaging about $1,054 of debt each year, that number coming most recently for this year and five percent over last year’s number; in total about 44 percent of shoppers raked up more than $1,000 in debt, but an even more staggering 5 percent had $5,000 in holiday debt.^[1]

What the same study also details is that paying back the debt is hardly going to be any easier, certainly not as easy as it was to spend it in the first place.

Within 3 months, only 50 percent are expected be able to pay it back, with 29 percent needing more than 5 months, and 10 percent only able to pay the minimum, meaning that interest rate at around 16 percent adds an extra $500 to your debt total.

The year 2016 wasn’t much better with the average consumer adding about $1,000 in holiday debt, with an even more interesting debt twist.

Not only did $1,000 of spending occur as far as debt goes, but also that 1.7 percent increase in comparison with 2015 also had 65 percent of the population saying the debt was unexpected, an interesting choice of words.^[2]

The word “unexpected” is intriguing because it takes into consideration that there is no budget involved in how holiday shopping takes place, and that is alarming given that debt isn’t anything new year-round, but the holidays specifically.

Budgeting is often the cure-all for acquiring debt, so if well above half of holiday shoppers a few years ago went into debt, spent too much and weren’t sure why or how that happened, you’d assume that planning wasn’t part of their holiday equation.

The debt piece for the holidays really is just a microcosm of what debt has become in the United States, even beyond what happens from Thanksgiving until Christmas.

Simply put, it’s nothing new for the majority of people.

The American consumer averages just under $7,000 in credit card debt alone, with the United States at around 1 trillion in 2017 and that $7,000 figure being about 3 percent higher than last year at this time.^[3]

The credit score and debt relationship is one that is hardy amicable, since they play off of each other quite a bit.

Your credit score is often determined, as far as debt goes, by your debt to income ratio (more on that in a bit) as well as how much debt you carry but more intently the debt you have in relationship to how much credit you have available, often referred to as credit utilization.

As far as the average credit score goes, you’d have to look at most of the news being good, but how long that lasts begs to differ when you look at how much credit is being used and that debt, whether that’s the holidays or not, continues to be on the rise.

The average credit score is around the 670 mark, which is considered on the higher side of “good,” so that varies of course state to state, but overall the score is in a good place.^[4]

That said, the influx of more debt doesn’t do the average consumer any favors, and with the holidays here and ready to leave in a few days, you have to wonder if thoughts of improving your financial standing are going to be on the minds of the masses as December turns into January, and New Year’s Resolutions start hitting, one of which is most likely to get your finances in order.

Aside from exercising more and getting in shape, most want to spend less and save more.^[5]

That means you’ll not only have to assess how you did after the holiday spending but understand what affects your credit score more than other aspects, and how to react accordingly now that the holidays are over and you’re left to sort through this financial rubble.

Here’s how you can address your credit score now, to improve on it and get 2019 started in the right direction financially:

Address holiday debt right away, because it’s new

Focus has to be made on the holiday debt, because it’s just happened, and it’s right there in front of you.

Look at it this way: if you’re credit was already on shaky ground, and you added to it then the first step is to pay it off within 30 days, no questions asked.

Adding to that average of $1,000 is that $500 in interest at 16 percent means that if you wait up to six months to pay it off, you’re responsible for quite a bit more than you initially spent.

You may ask yourself the question: “how can you pay back $1,000 in six months?”That’s a valid question, mostly due to the fact that if you had $1,000, you would have used the cash on hand anyway to buy the gifts in the first place.

That said, this is more about paying off as much of it as you can and as quickly as you can.

That isn’t just about finding the extra $1,000 but more about changing how you spend day to day, month to month moving forward after you get more debt.

You can change by canceling a cable bill or another expense for a few months, dropping a gym membership, limiting how much you eat out, etc.

Often lost in the shuffle when you want to raise your credit score is debt, either current or old, and not focusing on the budget in front of your face that is broken from top to bottom.

Pay down debt so you have some utilization breathing room

Credit utilization makes up about 30 percent of your credit score, and funny enough you should be at around 30 percent when it comes to the utilization figures themselves.^[6]

How exactly does credit utilization work?

That 30 percent says basically that if you have a credit card with a limit of $10,000 that you should have no more than $3,000 on that card, showing that you have a $7,000 gap between what you owe and what you can spend.

Far too often, again whether that’s the holidays specifically or just in general, individuals are “maxing out” credit cards, and that $5,000 credit limit has a balance of $4,000, which is highly inadvisable.

The problem the holidays presents it that you don’t have any extra money for gifts, you are barely paying the bills that you have and you’re saddled with getting presents for friends and family, for example.

You turn to credit cards, and squeeze every last drop out of them in order to get those aforementioned gifts and only add to the lowering of your credit score.

Even if you’re not able to “pay off” your debt in full, that revolving debt doesn’t have to spell complete doom. The idea is to manage it by making sure you’re not nipping at the heels of your total credit allotment.

Don’t be late on a payment, even if it’s just the minimum

Consistently paying your credit cards or other loans on time accounts for most of what factors into your credit score.

Even one late payment can allow a score to drop up to 100 points.^[7]

So as much as it is frowned upon to pay the minimum payment, you’d much rather go down that road than to simply not pay whatsoever.

The idea that paying late is acceptable should be vanquished immediately and in its place is, at minimum, the very least you can pay, and those on time payments conversely can help your credit score even if you’re not making much of a dent in the overall balance, mostly due to the higher interest rates.

Thirty-five percent of your overall credit score is related to paying on time.^[8]

This certainly isn’t a “green light” to go ahead and start accumulating more debt and only falling back on the fact that you make payments on time as a means to justify what’s transpiring.

Instead, consider that timely payments are going to keep you, at the very least, on the right track with your score, and won’t certainly detract from it.

The key is to keep paying on time but perhaps employ a better system to start tacking higher interest debts or the higher balances you’re dealing with, rather than staying at the bare minimum for the duration of every single loan you have, particularly credit cards.

If all you can make on all your debt is the bare minimum, you may want to consider, as mentioned early, that budget you have (or don’t have) and if you can eliminate some expenses in order to tackle your debt.

Canceling a bill or getting rid of something you value isn’t easy but it can help assure that debt, even if it’s only a few dollars extra every month, can find its way to a zero balance, rather than having it linger, minimum payments aside.

Your credit score is far too important to ignore as far as what those three numbers mean to you long term.

Without a score that is deemed fit to do business with, you could argue that you’ll end up having higher interest rates on big-ticket items, such as your car or home, or perhaps being completely shut out of having those things altogether.

While credit scores have been on the rise and improving, an ominous statistic is out there, and it cannot be ignore.

Recent reports suggest that the credit scores of teenagers, who haven’t established credit and thus the low score can be explained, have better credit scores than those who are in their 20s and 30s.^[9]

This would lead to the assumption that we’re not doing a very good job early on managing money, whether that starts with parents talking to their kids about how credit and the score works, saving money, etc. or those who are younger are frivolously spending without much regard for putting aside a retirement plan, nest egg or investing what they make.

Then again, they could just be living beyond their means, too.

The best friend your credit score could have is the person attached to it making payments on time, paying down debt but not necessarily closing accounts either. You need to show that you can manage debt timely and aren’t borrowing at or near your limitations.

Doing that is only going to help that score immensely, with getting rid of debt and having a solid financial future as the larger, bigger picture of how you want your credit score to look.