A healthy credit score is the foundation for building wealth, but knowing exactly what steps to take to improve your credit can be confusing.
Not to worry! We’re going to walk through a few expert strategies to improve your credit so you can leverage that strong score to build lasting wealth, no matter where you’re starting.
How to Improve Your Credit & Build Wealth
Your credit health is one of the most essential pieces of your financial puzzle. If you have bad credit, every other aspect of your life can feel difficult and expensive. But in many cases, your low credit score might not even be your fault.
Many mamas see their credit scores drop after facing unexpected medical bills or other overwhelming financial emergencies. Or maybe you didn’t have the credit knowledge you needed. Either way, it’s okay!
No matter how you got where you are, there’s no judgment or shame here—just excellent credit strategies from The Frugal Creditnista, Netiva Heard, to help you get back on top of your financial game.
Why Credit Health Matters
Your credit is more than a three-digit number. It’s a satellite view of how you handle your money. A great credit score has many benefits and can impact your life in ways you might not realize:
- It saves you money. If you have good credit, you can qualify for better (lower) interest rates and pay fewer fees, leaving more money in your pocket for investing or even saving for an emergency fund.
- It helps you own or rent a place to live. Mortgage lenders and landlords are cautious when it comes to applicants with low credit scores. They could look right over you and jump to the next consumer with the good credit score.
- It helps you build wealth. It sounds weird that good credit helps you build wealth, but access to lower fees and interest rates can free up more money to put toward building wealth.
Being the smart money mama you are, using your credit to save, own, and build is key.
Why You Need a Credit Score
It might surprise you to know that one in five consumers don’t have a credit history or score at all. Why not? It just means they aren’t using credit. But having no credit can hurt you, too.
So, if you don’t have a credit score (whether you’re young and haven’t had time to build one or you’re older and don’t want to use credit anymore), don’t try to establish it all at once.
If you go too fast, you’ll defeat your efforts because many lenders will assume you’re a high risk and won’t lend to you.
Instead, take your time and limit the number of inquiries on your credit report. This approach helps you build your score slowly and steadily, just how lenders want it.
How to Recover from Bankruptcy
You might be afraid of filing for bankruptcy. But it’s not the end of the world for you, mama. You can recover with some time, patience, and changes to the way you think about your money:
- Get everyone (spouse, kids, family, friends) on board with your new frugal goals.
- Know where you can shop and what you can afford (maybe skip that expensive vacation this year or hold off on buying that car if you can).
- Be honest with yourself—think about your dreams and goals—and align your finances to match your values.
Sometimes bankruptcy is the best choice for your finances. Don’t get stuck in the stigma or shame. Instead, get all of the information you need to make the best decision for you and your family.
Baby Steps to Keep Increasing Your Credit Score
Whether you’re recovering from bankruptcy or trying to get your credit into the 700s, taking the right steps can help you get where you want to be:
- Keep credit utilization low by spending less than 10% of your available credit
- Check for errors on your credit report and dispute them
- Look for identity theft and report it
- Open new credit cards only when you have a purpose for them (as a tool, not a way to spend more)
- Drop cards and lines of credit that are no longer serving you and get another that will grow with you
You can get a free copy of your credit report from all three major credit bureaus through AnnualCreditReport.com. Reviewing your file can help you spot identity theft and fix errors that might be dragging your credit score down.
The Best Way to Lower Credit Utilization
Credit utilization is the second largest portion of your credit score, so getting it down is vital. If you have high credit balances, you have a few options to get out of debt and lower your utilization rate:
- Consolidation: You might take out a personal loan to pay off your credit cards. Doing this eliminates all utilization, which can help your score. Just make sure you can afford the payment before choosing this option.
- Balance transfer: If you have decent credit, you might qualify for a 0% APR balance transfer credit card. This lets you pay zero interest for a limited time. Balance transfers are riskier because you’ll be charged interest retroactively if you don’t pay off the balance before the introductory period expires.
- Use a debt payoff strategy: You might use the debt snowball, debt avalanche, or another method to pay down your credit lines.
Whichever method you choose, make sure that you’re comfortable with it and will stick to it.
Improving Your Credit Score: The Bottom Line
Improving your credit score is a lot like becoming a mama: You need patience and consistency. If you go “all in” and make several changes over a short amount of time, your efforts can backfire.
Small, baby steps to improve your credit are the most effective.
And remember: It won’t happen instantly. But, with the right approach, you could see a significant jump in your credit score in about 12 to 24 months.
What’s the next step you’re going to take to improve your credit score?
Meet the Expert
Netiva Heard of The Frugal Creditnista is the personal finance coach people call when the only thing standing between them and their next major life move is their finances. Affectionately known to her clients as the “The Goal Crusher’s Credit Coach”, she offers honest, no-non-cents advice that helps individuals and couples to create rock-solid financial foundations that they can begin leveraging to create wealth.