Debt can make credit building difficult, but not impossible. In fact, managing your debt and improving your credit score can be done hand in hand. In this blog post, we’ll cover some tips for debtors on how to build credit, even when you have debt.
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Pay Your Bills on Time
One of the most significant factors in building credit is paying on time. Late payments can negatively impact your credit score and make it more difficult to obtain credit in the future. Set up automatic payments or reminders to ensure payment never misses.
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Keep Your Credit Utilization Low
Your credit utilization, or the amount of credit you’re using compared to your available credit, also plays a role in your credit score. Keeping your credit utilization low can boost your score. Aim to use no more than 30% of your available credit, and pay off your balances in full each month if possible.
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Consider a secured credit card
If you have poor credit or a limited credit history, a secured credit card can be a helpful way to build credit. With a secured card, you’ll need to deposit upfront, which becomes your credit limit. Use the card responsibly and pay on time to build your credit score.
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Make Extra Payments on Your Debt
While it may seem counterintuitive, extra payments on your debt can actually improve your credit score. Paying down your debt reduces your credit utilization and shows lenders that you’re responsible for your finances. Consider using any extra money you have each month to pay down your debt faster.
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Monitor Your Credit Report
Regularly checking your credit report can help you identify any errors or inaccuracies that could drag down your score. You’re entitled to one free credit report each year from each of the three major credit bureaus. Check your report for errors and dispute any inaccuracies that you find.
In conclusion, building credit when you have debt can be a challenge, but it’s not impossible. By paying your bills on time, keeping your credit utilization low, considering a secured credit card, making extra payments on your debt, and monitoring your credit report, you can improve your credit score and build a stronger financial future.