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Steps to Take to Prepare Your Credit for Future Needs

The Covid-19 pandemic wreaked a lot of havoc on personal finances. You may have noticed that your neighbors are having troubles; perhaps their house is on the market for sale or they are selling a car. Some people lost their jobs, which can lead to greater financial stress. If you are worried about your credit, you need to know that the steps you take now towards your credit can protect you in the future. Here are some steps you can take now to give you better credit in the future. 

Know Your Credit Score

The most important item you need to know before you obtain credit is to know your credit score. There are three major credit reporting agencies in the United States. Each of these credit agencies reports your creditworthiness based on a number of factors. The two largest factors that impact your credit are how much of your credit you have already used, and whether you are behind on your payments with current creditors. 

You need to understand the credit numbers on your credit report. Your credit score should be between 300 and 800 points. Most Americans average around 700 points, which is considered good. A credit score from 600 to 700 is considered fair, a credit score of 700 to 800 points is considered a good score, and any score above 800 is considered excellent. The higher your credit score is, the easier it is for you to obtain credit, such as credit cards, reverse mortgages, car loans, and home loans. You can learn more about the pros and cons of reverse mortgages here: https://reverse.mortgage/how-does-it-work.

Watch Your Spending

If you have a good credit score, you need to protect it. You should only get more credit if you can afford it. For example, if you already have one credit card, and you want another one for emergencies, you may only want to obtain another one if you don’t use it. The more credit you have, and the less credit you use, the higher your credit score will be. 

Not sure that you can be careful with the credit you already have? This is the perfect time to put your credit cards in the deep freeze. You can put your credit cards in a container of water in the deep freeze. That way, you will have to thaw your credit cards out to use them, which means you won’t be able to make impulse purchases. Another tip is to put your cards in an envelope in a spot in your house where you won’t have access to it easily. If you are shopping online, as many of us are during the pandemic, you’ll have to hunt down your credit cards to use them. Either way, you won’t be as tempted to use your credit, which will make it easier for you to obtain credit later. 

Decrease Your Debt

Another great way to increase your credit scores for the future is to decrease your debt. You’ll want to work on paying down the debt you already have. Many financial advisors advise you to address your lowest bills first. Pay off your lowest debt on your credit card first, then tackle the card with the next highest bill. Don’t make any more credit card purchases--instead, focus on paying cash and paying down your debt. 

What if you owe a lot of money and you are feeling overwhelmed, especially if you lost your job during the pandemic. If you are feeling overwhelmed about your debts, you may want to think about consulting a debt counseling service. These debt counseling services often are offered free of charge. They can work with your creditors to eliminate fees and interest, which allows you to pay off your credit cards more quickly and reduce your debt. 

Think About the Future

If you are saving up to make a large purchase, such as a home, there are several ways you can approach a purchase. First, you may want to sit down with your partner and fill out a budget. If saving 10% of your salary seems too extreme, you may want to start with saving 1% of your salary and 1% of your partner’s salary for a year. You can then increase your savings by 1% each year until you reach 10%. You can also begin your savings journey by reducing your expenses, such as extra streaming services you don’t use, gym memberships or even subscription services. Look at cutting costs with your phone bill or insurance company as well. The more money you can save, the more money you’ll be able to put down on your house. If you can follow these steps, you’ll be buying your new home in no time. 


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