Welcome to my 52 Ways to Save $100 a Month series. We’re serious about saving money in 2016. Sometimes it’s the little things and sometimes it’s the big things. I’m here to walk you through some little things that can add up to BIG savings. 52 little things to be exact. Every week, join me back here for another small money saving tip or idea that might not seem like significant savings until you see the overall yearly savings. It might just blow your mind. So pop in each Tuesday and read a new tip that will help you on your way to save $100 a month!
Seems silly that working to improve your credit score will make much of an impact on your bottom line budget. But let me tell you Bob the savings from having a better credit score can be HUGE. We’re talking tens of thousands of dollars over the course of your lifetime. That’s not silly chump change! That’s life changing stuff! Here are just a few ways you’ll save:
2. Car Loans
3. Credit Card Interest Rates
4. Auto Insurance
If you think about the interest rate on a 30-year fixed-rate mortgage, improving your credit score can change your interest rate by almost a full percentage point. That easily equates to a savings of over $100 a month at the least. And did you know bad credit can raise your car insurance rates more than a DUI? WHAT?! So when we’re talking credit score improvements, we’re talking money in your pocket. But talk is easy, it’s actually changing the score that is a little tougher. But it’s doable. Here are some great tips to help you on your way to a better credit score:
- Meet with a financial adviser: There are many who can refer you to free debt counselors. Contacting and dealing with a debt counselor will not hurt your credit score in any way. Be very leery of paying someone to help fix your score, but most financial advisers will have great tips and advice.
- Know your credit score: Knowledge is power and knowing really is half the battle when it comes to your credit score. Check your credit report often. Make sure that everything is accurate and check to make sure you are up to date on all of your payments. I love Credit Sesame for help with this. It’s free, monitors your credit and is super easy to use.
- Contact your creditors: If you have fallen on hard times and know you won’t be able to keep up on your payments, or if you have negative reportings on your credit report, contact the debtors in questions and ask to work with them on a payment plan. Sometimes they will also work with you to get that ding on your credit report taken care of. When you reach out to them instead of the other way around, they are much more willing to help!
- Stay current: Speaking of making your payments, this is a big one in terms of how your score is affected. Even if you have what feels like an insurmountable pile of debt, keeping up with monthly payments goes a long way with the health of your credit score. Even if you can only make the minimum payment, do everything in your power not to exceed that 30-day late payment window.
- Pay down debt: This one might seem overwhelming. Take a deep breath. You can do this. Decide which debt you are going to tackle first. Dave Ramsey stresses a great method of tackling the smallest debt first, because it gets you out of a payment faster. If Dave’s not your cup of tea, do some research and find an approach that you think will work for you.
- Apply for credit only if you must: Don’t open too many new accounts all at once. This is considered a credit risk and negatively affects your score. You might see scores dip a bit when you first open a new account. A new, unused card represents risk. It’s not clear whether you will charge to your limit, or use the card carefully and pay your balances as agreed.
- Keep your accounts open: Closing unused accounts may really hurt your credit. This is, in part because, your score is determined by the amount of debt to available debt ratio. You will have to weigh the option on a personal level as to whether that dip in your score is worth it to you.
- Don’t max out your cards: It is best for your score to never maintain a balance of more than 10%-30% of your total limit at any one time.
- Mix it up: A mix of credit seems to improve your score, i.e avoid having solely revolving credit or all installment loans. Mix it up with car loans, mortgages, and credit cards. Credit reporting agencies like to see you can handle various types of debt and reward you accordingly.
Have you seen the impact of having a better credit score? Do you have any tips on great ways to improve your credit score.
How Much Can You Save: $526+ Let’s just talk about savings on auto insurance as an example. Consumer Reports found that drivers who had merely “good” scores paid up to $526 more than similar drivers with the best credit scores, depending on their home state. And that’s JUST insurance!! Can you see how quickly bad credit can add up?!