Debt and a bad credit score can be intimidating, but there are many ways to improve your credit score without having to pay off all your debts at once. Dimitri Pan, a wealth advisor at Ally Financial, recommends first understanding the concept of credit and how it is calculated. Credit is the ability to borrow money that must be repaid later, and the credit score indicates a borrower’s creditworthiness. This score is influenced by several factors: payment history, credit composition, outstanding balances, and length of credit history. Responsible use of credit can therefore be helpful when making expensive purchases or unexpected expenses. Courtney Alev of Credit Karma emphasizes that even small measures such as reducing credit utilization can make a big difference. A high utilization rate signals that credit cards are close to full utilization and can significantly lower the score. Experts therefore recommend keeping utilization below 30%, i.e. not spending more than $3,000 with a limit of $10,000. Melissa Lambarena of NerdWallet recommends paying off credit card balances early and often, and requesting a credit limit increase if necessary. Making payments on time is also crucial for a better credit score. This advice is supported by Pan, who also suggests automatic payments to avoid delays. Andrea Woroch, an expert in consumer credit and budgeting, advises using a single credit card to keep track of everything. Old accounts should not be closed, as the length of credit history is significant. Regular, small spending on all cards will prevent them from being closed by issuers. Hastily applying for multiple credit cards can temporarily lower your score, as they trigger so-called “hard inquiries.” Woroch suggests transferring credit card balances to 0% interest cards to save on interest and manage credit usage cheaply. Another option is to use secured credit cards, which help build or rebuild creditworthiness by putting up an amount as collateral. Regularly checking credit reports for errors should also be part of the strategy, as corrections can quickly improve your score. Those who do not have access to credit cards for balance transfers or secured cards could use the alternative of acting as a secondary user on the account of a trusted family member. This can have a positive impact on one’s own credit rating, depending on the responsible use by the primary user.
