It may not happen often, but that day when you get a windfall of cash is glorious no matter what your financial situation. It could be a tax refund, a rebate of some kind, or a bonus at work. The source of the money is irrelevant. It’s what you do with it that counts. If you’ve been having some financial troubles, getting a nice chunk of change could be just what you need.
Here are five ways you can use a windfall of cash to improve your credit:
- Catch Up. If you’re late on any accounts or an item has been sent to collections, get that situation sorted out. The item will still show on your credit history, but your score will be better off if the account in question is paid up rather than still sitting in limbo.
- Pay Down Balances. If you have a balance on a credit card, attack it. You should aim to use no more than 30% of your available credit at any time. A balance above that threshold should be a top repayment priority.
- Focus on High Interest Balances. The higher your interest rate, the more you’re going to pay for the money you borrow. Over time, it’s going to cost you a lot more to carry that balance than a balance on a card or loan with a lower interest rate. You’ll get out of debt faster if you’re not racking up more with high interest rates.
- Build Your Emergency Fund. At minimum, you should have $1,000 saved for emergency expenses like car repairs, medical expenses, or appliance breakdowns. By putting some money aside, you’re less likely to have to pull out the credit card when something goes wrong. While this tip won’t help your credit score go up, it will help you keep it from going down!
- Fund a Secured Credit Card. Successfully using credit is a great way to build up your credit history and boost your score. If you can’t obtain a traditional credit card because your score is too low, whether because you have no credit history or because of credit problems in your past, a secured card can help. With a secured card, you put down a deposit (generally $200-$500) and you receive a credit card with that amount as the limit. You’ll use the card like any other. If you pay off what you use, you’ll build better credit.
An auto loan is another great way to build positive credit history. A windfall can help you put a down payment on a reliable vehicle that can keep you moving ahead. If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you ever step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!