How to Build Your Credit Score While Staying Debt-Free

Did you know that student loan debt in 2020 is $1.56 trillion dollars? Whether you’re suffering from student debt, regular debt, or want to stay out of debt, there are ways to build your credit score. 

Wanting to stay debt-free while you build your credit score? Read on to explore the top tips for building your credit score fast, and let your worries of debt melt away. 

What Is Your Credit Score? 

A credit score can range from 300-850 and looks at an analysis of your credit file. A lender will take a look at this number to determine how likely you are to repay loans. This can impact buying a home, car, etc. 

Credit score breakdown:

  • Very poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very good: 740-799
  • Excellent: 800-850

How Are They Determined? 

The factors that go into determining your credit score are the credit mix, the amount owed, payment history, and new credit. Your credit mix is how many credit products you have. Credit products are loans, credit cards, etc. 

New credit is how many new accounts you open. The payment history takes a look at how often you pay credit accounts. 

The amount owed takes a look at your credit limit along with the loans and credit you’re using. Credit history is how long you’ve had credit for. 

Building Your Credit Score

Credit restoration can include opening credit cards. Explore credit cards that have a low spending limit. This is a good option if you have no credit, and want to build it. 

When you first receive your credit card, it’s a good idea to make small charges that you can pay off without building debt. This helps improve and build your credit score. 

Take a Look at Credit Collections

Don’t wait for collections accounts to drop from your credit report. Start speaking with the necessary party to have it taken off. Every time you make a payment toward collections, it hurts your score. 

Speak with a creditor, and see about paying the entire amount to have it deleted. If you go with a letter of deletion, it’s different than a letter of payment. 

If you can’t reach an agreement, ask the company to stop reporting it to the credit bureau, and that you’ll pay it off. This will help keep your credit score at its current amount. 

Dispute Credit Errors

If you notice a mistake on your credit report, that can spell danger. You can receive a free report once every year from TransUnion, Equifax, and Experian. Dispute any errors you notice in order to have them removed. 

Keep Open Credit Cards

Don’t close your credit cards since this can hurt your credit. This will cause you to lose that credit card’s limit.

Allowing this to happen can hurt your credit score overall. Use the card once in a while to keep it open. 

Secure Credit Cards

When searching for credit repair Dallas, use a secured credit card to help with building your credit score. They’re supported by a cash deposit. You pay the amount upfront, and the amount is the same as your credit limit normally. 

Ensure that the secured credit card reports it to all 3 credit bureaus. You can use it the same as a regular credit card, and the payments will help your credit score as well. 

Staying Debt-Free

To stay debt-free while working on credit restoration, you’ll want to ensure that you maintain a budget. You’ll want to stick to it, and see how much money you have going out and coming in each month. 

If you receive a pay increase at work, that doesn’t mean you should increase your spending. Focus on saving your money every month. A good way to save is to take a % of your paycheck and ensure that it goes into savings, and you don’t touch it. 

Check Net Worth

You can take a look at your regular statements to track your progress. Once they’re paid off, you don’t have to worry about them again. To remain focused on debt-free living, take a look at your network. 

Celebrate milestones such as going out to eat when you’ve stayed debt-free or other activities you enjoy. When you reward yourself on staying focused on your goals, you’re more likely to maintain them.

Set Your Credit Limit

When you’re looking to fix credit, it’s a good idea to set your own credit limit. Credit cards are tempting, and an easy way to spend more than you should. They entice cardholders by offering rewards. 

Make a rule about how much you’ll charge each month on your card. Make sure that you don’t use that credit card past the limit that you set for yourself. 

Pay Off Transactions

It’s a good rule of thumb to pay off transactions immediately so that you don’t wind up forgetting about them and receiving late fees. When you decide to use a credit card, come up with a rule that you’ll pay off the balance that day.

Don’t wait for the bill to come to you. This will encourage you to think about each purchase you’re making to ensure that you can afford it. 

Exploring How To Build Your Credit Score and Stay Debt-Free

Now that you’ve explored how to build your credit score while staying debt-free, you should have a better idea of how to make debt a thing of the past. Are you drowning in debt and aren’t sure what to do?

Wish there was a way to improve your credit score, but feel like there are no options? Or, looking for credit repair Dallas?

Get started on our credit program today! Say goodbye to debt for good by receiving an in-depth credit audit and more to eliminate debt today!