home buying snacks

how i improved my credit score

in less than two years, i increased my credit score about 200 points.

it seemed so daunting at first. where would i even start?

it just so happened that when i was inquiring about home loans, i got different pieces of advice from each lender i spoke to. i made myself a checklist and i got to work.

my list to take care of:

  • pay off Ann Taylor credit card (less than $1000 owed)
  • pay off GAP credit card (less than $1000 owed)
  • get my citi card under half of what i owed, goal balance of under $1,500
  • get my Nordstrom card under half of what i owed, goal balance of under $1,850

seeing the amounts i owed made me wonder how i could possibly do it. obviously i was going to have to pay more than the minimums if i was going to pay these cards off in a timely fashion.

so, i made a list of all of my bills and what i owe every month:

  • electricity: $30
  • citi card: $80
  • gap: $30
  • nordstrom: $130
  • ann taylor: $15
  • car insurance: $120
  • car payment: $285
  • total bills: $690

then, i estimated what i spend on a daily basis (gas, coffee, snacks, etc.) and came up with a guess of about $25 a day, which is about $175 a week, about $700 a month (whoa!)

then:

if i make $2600 a month

and i owe/spend $1390 a month (subtract 1390 from 2600)

that leaves me with $1210 “extra”…

if I divide that by 4 (for the 4 credit cards) that leaves me with $302 i can afford to pay toward each card each month! much more than the minimums asked for.

and that is what i did until i hit my goals.

when i hit the goals i listed above, i saw my credit score jump up! especially when credit cards were paid off completely. so if you have the means to do so, just bite the bullet and pay them off totally. it’s painful but will be worth it in the long run.

a wise man (my dad) once told me: “sometimes you gain something by subtracting something else.”

think about how much money you’ll be saving each month when you don’t have to spend your hard earned cash on stupid credit card bills!

i also like to pay bills every friday (which is when i get paid).

but what happens if a bill, especially one that affects credit, is due on a thursday and you plan to pay the day after on that friday? won’t that count as a late payment and decrease your credit score?

not necessarily.

most, if not all, credit card companies and lenders have a grace period. for example, i have found it’s common to have a 15 day period after the due date to pay before they hit you with a late fee. what’s more, often there is a 30 day grace period where you can pay and not be reported to the credit bureau (reporting is when your payment is more than a month late, gets reported to the credit bureau, and this goes against your credit score).

these grace periods are probably not the same across the board so please instead of just assuming, call your lender or credit card company and just ask “how long do i have to pay until the payment is counted as late and reported to the credit bureau?” it’s good to know.

 

 

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