As we celebrate the Fourth of July and America's independence, declare your freedom from debt, low credit scores and high credit rates. This all begins with being aware of your finances.
The first step to financial independence is being aware of how you spend your money. Home expenses, eating out, utilities, high-priced coffee shops, car note, fuel, insurance and credit cards. Know how much you spend then formulate a budget to pay bills and allow you to save money (even a little bit) every month.
Want to go to Hawaii for vacation? Having a budget allows you to pay bills and still save for that special purchase or long-awaited trip. Start by adding up expenses and when they are due each month, then divide the bills to be paid out of paychecks over the course of the month to allow money for daily expenses.
Don't forget to budget in what you plan to save and know how much you need for that special vacation or purchase. Revisit and evaluate your budget as needed to stay on track to financial independence from overdue bills, late fees, and collections calls.
Consumer credit scores are another important key to unlocking financial freedom. Credit scores are the result of several factors, including credit and pay histories as well as available lines of credit, and can determine whether you qualify for a credit card, a new car, student loan, mortgage, or business loans and interest rates on loans.
The better the credit score, the better the interest rate, and this can add up to saving thousands of dollars in interest over the course of an auto or home loan.
Having more credit and more credit cards does not necessarily make a good credit score rating. The key factors are job stability, paying as agreed and paying on time. Keeping up with payments will build a better credit rating than opening numerous credit-card accounts. Bad credit and poor payment history will be a costly road to travel and will take years to correct.
Better Business Bureau offers the following tips to improve or maintain a good credit score:
Don't hide from debt. Contact creditors or collections agencies and try to work out payment terms. Ignoring debt only worsens the problem and devastates credit reports.
Establish credit. If you don't have any credit cards, you might consider opening an account, using it sparingly and paying it off at the end of the month. Someone with no credit cards tends to be regarded as higher risk than someone who has managed credit cards responsibly.
Do not run up your credit. Ideally, you should keep your balance low -- less than 30 percent of your credit limit on each card.
Visit AnnualCreditReport.com. Consumers are entitled to one free credit report from this government-sanctioned website once a year. It is vital to check these reports for inaccuracies, and dispute any errors. Checking your credit reports does not affect your score.
Pay off debt rather than move it around. Debt is debt. Shuffling it around from one line of credit to a new one can be a problem. Opening an additional credit line to do this can weigh down a credit score.
Pay off highest balances first. Though you may be tempted to pay off smaller balances first, paying down a large balance on a particular line of credit may raise your score, because it represents the freeing-up of a larger portion of your available credit. Set up bill pay reminders to help keep yourself on track.
Please contact Better Business Bureau at bbb.org or (337) 981-3497 24 hours a day for information on businesses throughout North America. Consumers can now have the latest news from BBB in their inbox!
BBB Serving Acadiana services the parishes of Acadia, Evangeline, Iberia, Lafayette, St. Martin, St. Landry and Vermilion.
Sharane Gott is the President/CEO of the BBB of Acadiana.
The BBB of Acadiana works for a trustworthy marketplace by maintaining standards for truthful advertising, investigating and exposing fraud against consumers and businesses.