Here are a few more ways you can improve your payment history, and ultimately, your credit score.
Consider setting up payment reminders with your online bank, or better yet, set up automatic monthly payments. If you don’t want to go that far, many lenders and banks will send you emails or texts as a reminder to pay on time.
If you get a tax refund, a bonus from work or another lump sum – even if it’s from a garage sale – direct those funds to pay down your balances. This will improve your credit utilization ratio and raise your score.
Also remember the faster you pay down your debt, the less you’ll pay in interest overall – this will help your bottom line more than it will your credit score.
Take this example from our recent story about how to pay off holiday debt:
Let’s say you spent $1,000 using a credit card with a 15 percent interest rate. Most cards set the minimum payment at 2 or 3 percent of the balance. Let’s use 2 percent for this example.
Your minimum payment in the first month would be $20. If you stay on that course, it will take you 79 months, or more than six-and-a-half years, to pay off the card.
In all, you’ll spend an extra $579 on interest, bringing up your actual holiday spending to $1,579.
Take the same example but for a 22 percent interest rate. It will take you 137 months, or more than 11 years, to pay off the debt by paying the minimum only.
Your interest cost would be a whopping $1,735, making your total holiday purchase cost $2,735.
Costly, for sure.