Throughout the general blues brought on by the economic recession, did you ever wonder if you could do some small part to help? Turns out you can – by first helping yourself. And the best way to help yourself, at least in this case, is to improve your credit score. Learn why raising your credit score will have a positive effect on the economy and find out some of the best ways to go about it.
Consumer spending habits go a long way in making the economy run
Consumer spending, it turns out, accounts for a full 7% of the U.S. economy. From an economic standpoint, this is a pretty sizeable chunk.
During the golden years of the housing market, consumers were doing well. They were earning and they were spending (not saving though, as we all know). But that was okay – housing values were appreciating, so debt didn’t seem to matter.
Fast forward to the present day. Housing values dropped, millions of people lost out on resale value, and most folks realized they’d accrued sizeable debt loads. Therefore, the spending stopped…closely followed by a ruined economy.
Get on board to get the economy running again
As we all wait for the economy to recover, we can pitch in by restoring health to our own finances. Once we do this, we’ll have spending money. We’ll then go out and spend – prudently, this time – and the economy will start to grow again.
But it starts with learning to better manage our finances. Companies like Fair Isaac, the outfit responsible for calculating credit scores, are on board to help consumers restore their financial health.
One sure road to financial health comes in the form of a healthy (read: high) credit score. You’d do well to make a commitment, here and now, to improve your credit score this year.
How to drastically improve your credit score
Below are some of the time-tested tips for radically improving your credit score:
- Pay your bills on time. Late payments to your creditors have major detrimental effects on your credit score. You’d do well to come up with a system that helps you pay bills on time with a few days to spare, ensuring that you never send in a late payment again.
- Don’t apply for lines of credit when you don’t need them. It might be satisfying to apply for credit and get approved, but if you don’t need it, don’t do it. It hurts your score in the long run. In cases where you do apply for and receive a line of credit, use it sparingly and don’t ever spend the maximum amount for which you were approved.
- Stay current on all financial obligations. This goes beyond paying bills on time. If you have any other financial obligations such as alimony, child support, membership dues, or anything else, make sure you stay current with your payments.
- Keep balances low on open credit accounts. Don’t spend the maximum allowed on all your credit accounts. High outstanding debt can have a negative effect on your credit score.
- Pay down revolving debt. Just do it – pay it off. Don’t move it around from one credit card to another (called “tarting”) – bite the challenge and pay it off.
- Keep unused credit card accounts open. Closing too many accounts too quickly can have a bum effect on your score.
- Don’t open a lot of accounts in a short period of time. New accounts lower the average age of your existing accounts. This can have a substantial effect on your score, especially if you don’t have a lot of other credit information accumulated.
- If you’re rate shopping, do it within a set time period. If you’re looking for a loan, shop within a focused period of time instead of spreading the search out over several months. When computing scores, Fair Isaac distinguishes between a search for a single loan and a search for several new loans, all based on the time period over which the inquiries occur.
Better credit scores mean access
Once you’ve improved your credit score, you’ll have easy access to solid credit lines. This will allow you to start spending and investing, which in turn will help reenergize the wheels of the economy.
