In my previous post, I discussed the need to plug up the holes in your cash flow bucket to free up income. When you discover and plug these holes in your bucket, your income is immediately increased without changing any of your spending habits. Here’s how the 5 Day Weekend will make sure your credit score is good.
Boost Your Credit Score with the 5 Day Weekend
Top on the list is increasing your credit score. Your credit score is an asset that can be leveraged to your advantage. A maximized credit score (ideally 780 or higher) is the key to restructuring loans to free up cash flow, getting lower interest rates, paying less on insurance, and more. If you can boost your credit score, you can often negotiate better interest rates, or at least transfer a balance to a loan with a lower interest rate. To get your most accurate credit scores that are used by creditors, go to www.myFICO.com.
Aside from paying your bills on time, here are the three most important things you can do to boost your credit score
1. Fix errors on your credit reports. According to a congressionally mandated study by the U.S. Federal Trade Commission, one out of every five consumers has an error on at least one of their three credit reports.
An error on your credit report can be the difference between being approved or denied for a loan, or getting a high or low interest rate. The credit reporting agencies are required by law to give you a free look at your credit report once a year at www.annualcreditreport. com.
One strategy I recommend is to request one free report from one bureau every four months. That way you can regularly monitor your credit and check for errors for free. But if you haven’t checked any of your credit reports in years, pay the extra money to check them all for errors now, and go the free route moving forward. Check your report regularly for misreported limits, duplicate accounts, and anything else that’s incorrect. If you do find errors, don’t dispute more than three errors at a time with the same bureau.
2. Manage credit cards wisely. It’s best to have three to five credit cards with the maximum limit that you can qualify for. Don’t get as many as you can. If you’re applying for credit cards more than three or four times a year, you’re going to have a five to fifteen point decrease in your score. The ideal amount of inquiries in a period of two years is two. Keep your balance low at all times—no higher than 30% of your limit, but the lower the better. And don’t cancel old cards. The length of the card’s credit history helps your score.
3. Have an installment loan within the last two years of your credit history. This is a loan for a fixed period of time with a fixed minimum payment, such as a car loan or lease, a jewelry loan, or a signature loan.
In my next post, I’ll look at structuring your loans and your insurance as a way of ensuring better cash flow and plugging up leaks.
In the meantime, I’d love to hear what you’ve done regarding your credit score. Are you aware of what your credit score is, and do you watch it regularly for errors? Thank you for sharing.
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]
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