With the economy being a little less than desirable it seems everyone is looking for ways to improve credit.  While it is easy to get rid of a bad pair of shoes, a bad credit score can stick with you for as long as the cycle continues.  Here are some simple tips on how you can improve your credit score.

1. Borrow

If you buy everything with cash, never apply for a credit card, or never use it, then your credit score will stay right where it is – nonexistent.  When I bought my first car the dealer wanted a co-signer because I was 20 years old.  He was afraid of two things: (1) I was too young to make a car payment on my own, and (2) I didn’t have a credit score to substantiate a purchase over $5,000.  After some haggling and a nice down payment, I was able to purchase my first car on my own.  So, for first time borrowers, this is an instant way to raise that nonexistent score.  Apply for credit, then use it within your means.

2. Pay

On time!  Just like the bus, you are a happy person when you get to work on time and creditors love when you send them a check on time.  If you are one day late, that gives the credit card company a reason to tattle on you to the three credit agencies.  Don’t give them the opportunity.  It will only lower your credit score and make it difficult to borrow later.

3. Say bye bye to rent

If you want buying power, which is what your credit score gives you, stop renting an apartment or leasing a car.  By renting, you are telling credit card companies and your own credit score that you are not committed to big purchases and long term commitments.  While it may not seem fair, you have to have some debt in order to raise your credit score.  The type of debt you need should be in the form of a car payment or mortgage.

4. Call on your utility companies

While it seems silly, your utility companies do not have to do a background check on your credit to give you heat and water.  Most companies request a deposit from new customers.  Give it so you can get water, but then each month, call your utility companies and ask them to report your on time payments to the credit bureaus.  Again, it will improve your credit score.

5. Use your department stores

Most stores offer an in-store credit card application to help you save.  As long as your address matches the address on your driver’s license, you will be awarded a small amount of credit.  This helps them keep you coming back when they offer rewards to card owners but also gives you a small increase in your credit score.  The more cards you have that have not been charged off and you are using can help raise your score.  Make sure if they don’t offer it to you (which probably won’t happen, as they get a commission for each application they file) that you ask for it.

6. Use, use, use…

If you don’t use the credit you have been given, your credit score might go down.  During these tough economic times, it is even possible for creditors to withdraw credit if you stop using it or pay a balance off.  That means you should put your groceries and gas on your credit cards and then pay them off every month.  Just be sure to use your credit card at least once a week so you don’t get stuck without credit at the beginning of another month.

What tips do you have to improve credit scores?

Source: Flickr

This is a guest post from Mr Credit Card of www.askmrcreditcard.com. Mr Credit Card is going to talk about how he uses credit cards to help in his budgeting efforts, in addition to being a convenience tool. If you are looking for a credit card, please check out his best credit cards list section

Firstly, I would like to thank budget pulse for allowing me the opportunity to guest post here. Today, I am going to talk about how to I use credit cards as a part of my budgeting tool. But first, here is a background. I charge everything to my credit card. There is a reason for that. I pay my bills in full every month (which everyone should) and I use it to earn rewards (which I’ll explain in more detail later). So how does my credit card help in my budgeting. Here is how I use it.

Expenditure Breakdown via Statement Summary – I get statement summaries from my credit card issuer once a year. It breaks down my expenditure into various categories. Because I charge everything to my card (except my mortgage), I have an accurate breakdown of my expenses and I use that as a basis for budgeting and adjusting our expenses.

Pay on time via autopay – I am extremely bad at paying my bills. I simply hate going through all the bills and writing my checks every month. So what I do is to use automatic payment with the credit cards I have. Every month at a set date, money is taken out of my bank account. I have never had any issue with this arrangement. There are tons of advantages of doing things this way. Firstly, you’ll always pay your bills on time. That is so important improving your credit score. Secondly, your credit card issuers can never accuse of being late if there was a mess up from their end.

Budgeting for my vacation – Believe it or not, but I’ve taken more vacations than not if not for my credit cards. For about the first ten years of my working life, I traveled quite a lot on my job. Because I was given a business credit card from my company, I managed to rack up lots of points (btw – I was given the Amex corporate charge card). These points were invaluable to me because they did not expire and I was able to get many free airline tickets simply because I was using my company’s credit card. It was not even my expenses. But what I did was that I also got the same card for my personal use and earned even more points. After a couple of years, I was able to figure out roughly how much I spent on my company’s business credit card and my personal credit card. With that data, I was able to plan and budget for my annual vacation. Very often, the cost is much lower because of those reward points I have earned.

Most credit cards also provide car rental collision insurance if you charge your card for the rental. This has also saved me a few hundred dollars every year on my vacation where I had to rent a car.

Saving Money – After I stopped traveling for work and switched companies, I realize that I would be better off earning cash rebates rather than reward points (since I would not be earning as much points). Hence, I got myself a credit card with cash back rewards. On average, I have been earning about 2.3% in cash rebates every year. This works out to be about $1000 every year. Once I got through the first year using the card I had and getting a feel for the rebates I earned, I could once again factor in the savings that I would get.

For folks who have debt, doing a credit card balance transfer will help in your budgeting as well when it comes to interest expense.

Ending Thoughts – Some folks got into massive credit card debt and hate to use them. For me, they have been an invaluable tool for budgeting for my vacation and actually saving money with them. All this only happens when you pay off your bills in full every month. I hope these little tips were helpful to you.

Source: Flickr

By Mala

It is a difficult time when you find yourself below the red line when it comes to your credit score.  And if you find your credit score below 650, it will be difficult to climb the credit ladder.  However,  There are ways to improve your credit score.  Some have a cost associated, but other methods require a little bit of time.  Follow these guidelines to help get out of the hole.

You probably have bad credit because of debt you currently have.  The first thing to do, before applying for credit cards, is to pay down your debt.  That will help your credit rating rise.  Here’s another tip:  if renting, ask your landlord or apartment complex management to report your paying on time to the credit bureaus.  The same can be done for your utilities, cell phone included.  After your debt has been paid down to a manageable level, you are ready to begin applying for credit again.

There are a variety of places to start when applying for credit.  It can be for a small specialty card, like a department store credit card.  They usually approve on the spot provided your bank card address and driver’s license address match.  Try those places out first, but do not apply for many over a short period of time.  Wait three months in between applying, as those companies will eventually check your credit score out and numerous inquiries into your credit history can have a detrimental effect.

After you have established a small line of credit through department stores, you probably will have the urge to fill out one of the credit card offers that comes in the mail.  Stop!  Don’t apply for those yet, as it is easier once you complete one process before.  Banks offer credit cards to those with “less than perfect credit.”  They usually have an annual fee or are more like a debit card but with more buying power.  If your credit is bad, and you need a credit card for emergencies or big purchases that you know you are able to pay off, pay the fee and begin to reestablish credit.  Below are some companies that offer these types of programs.  You can visit creditcards.com to see different offers.

Credit cards to look for

The first credit card that is geared for people with bad credit is the Applied Bank Secured Visa Credit Card.  It has an annual fee of $50.00 and a fixed interest rate of 9.99%, regardless of when you pay your bill.  You can have up to $5,000 in credit and there are no income or credit requirements.  You deposit money into this secured account and whatever money is there you are able to spend without the money being directly debited from your account.

Two other credit cards may be more helpful because they do not check your credit report.  First Option Visa and Next Millennium MasterCard offer up to $5,000 in secured credit and have an annual fee of $59.00.  By not checking your credit report, you are able to secure some new credit without it have an effect on your credit report.  Check into both to see which option is best for you.

While you may feel like hope is lost, it is possible to regain your credit reputation.  Keep working on paying off your debt, paying on time, and you will be able to lose the label.

 Even with the best of intentions, credit cards can lead to bad trouble. Whether impulse control or financial desperation is the culprit, many people end up in a pickle over credit card debt. New laws to curb sneaky industry practices were passed late last year; unfortunately, they won’t go into effect until July 2010. In the meantime, credit card companies are using every trick in the book to get more of your money, even blaming the economy as the reason for their shady policies. The industry’s talking heads make it seem like every Tom, Dick, and Harry is defaulting on payments, although recent reports confirm that just 9% of card holders are in default.

 Don’t feel bad if you’ve fallen for the alluring trap of seemingly free money. Many Americans do. As reported by the Associated Press, CreditCard.com found that the average outstanding U.S. credit card debt per household was $10,679 at the end of 2008. Furthermore, data from the New York Times reveals that 40% of American families carried a recurring monthly credit card balance in 2008 and that the average household had 13 cards.

 Things have only gotten worse in 2009. The credit card companies have chosen to play hardball with consumers in order to protect themselves from future losses, in some cases demanding credit scores of 740-750 for the privilege of charging your next purchase to their piece of plastic. Other tactics include increasing penalty fees, upping interest rates, and slashing credit lines, even for cardholders who have good credit and always pay on time. This is in addition to existing aggravations like the universal default rate, which will be eliminated in 2010 but for now allows companies to increase your interest rate if you pay late on ANY of your bills, even if the late bill payment was on an unrelated account.

 What all of this means is that you should limit your credit card usage (but don’t close your existing accounts), at least until the consumer-friendly 2010 laws go into effect. For starters, don’t make any new credit card purchases unless: a) it’s an emergency; or b) you can afford to pay off the balance in full. Also, pay off any existing balances as quickly as possible to avoid paying unnecessary fees. For example, let’s say you have a $5,000 credit card balance with a 14% interest rate. If you only make monthly payments of $100, it will take you 6 years and 4 months to pay off the balance, plus cost you $2,548 in interest fees. However, increasing your monthly payment amount to $500 allows you to pay off the balance in 11 months, which lowers your interest fee costs to $348 – a savings of $2,200.

 In addition, plan to periodically review the fine print of your credit card agreements in order to stay on top of changes to your interest rate and/or credit limit. Card issuers can change agreement terms at any time, and they’re only required to give you 15 days’ notice of these changes. Finally, make sure your credit card balance stays under 30% of your credit limit. Going above this amount may lower your credit score and increase your interest rate.