Living in America presents you with some of the best financial opportunities for overseas Filipino workers (OFW) you can have for living a better life and supporting your family. But our article ‘5 Tips for Better Money Management’ advises that proper money management is crucial to enjoying lasting financial freedom. This involves getting up to speed on financial basics and knowing how to live within your means.
This is especially true when it comes to your credit scores, which can get you the best terms and insurance rates when making big transactions. Considering that your credit score involves multiple factors, you will need to make sure you’re doing the right thing to keep it looking good.
Here are some tips that might be helpful for you as an OFW.
Monitor your credit report
You are entitled to check your credit report for free every 12 months, and it’s a good idea to take this opportunity to do so.
USA.gov states that credit reports list your bill payment history, loans, current debt, and other financial information. However, there are some cases where your credit report might contain inaccurate information or information you were unaware of that can make a dent in your score. Taking the time annually to check your credit report lets you contest any errors, prevent credit card fraud or identity theft, and remedy mistakes that could be harming your credit score.
Pay your bills on time
35% of your credit score is dependent on your payment history, with AskMoney explaining that your credit score can be significantly improved by simply paying bills on time for 6 months. Adversely, even just missing your payment by 30 days can reduce as much as 100 points from your credit score.
If you’re worried about paying your bills on time, you can opt for scheduling regular reminders or setting your accounts for automatic payments.
Expanding your credit mix
The credit mix refers to the types of credit accounts that are listed on your credit report. This accounts for 10% of your credit score. For creditors, a good credit mix of revolving credits and installment accounts reflects your ability to manage multiple credit types at once.
Revolving credit accounts are paid monthly, without having fixed dates or set balances, like credit cards. Installment credits, on the other hand, have fixed payments and end dates. These may include car loans, personal loans, and mortgages.
If you think that your credit mix is lacking, then you can remedy this by opening up new credit accounts or shouldering a new type of debt, if you can handle it.
Reduce your credit limit use
Your credit utilization is the portion of your credit limit that you use at any given time, and is how much you presently owe divided by your credit limit. CNBC reports that credit utilization falls under amounts owed — the second most important factor in your credit score at 30% — which is why it’s important to maintain a healthy ratio.
The best way to do this is by spending below your credit limit, and spending only what you’re sure you can pay. You can also choose to raise your credit limit, without increasing your spending. This lets you achieve a lower balance resulting in a lower credit utilization rate, positively affecting your credit score.
A good credit score can help you get the best transaction deals to live a good life abroad while saving up enough for your family. By following these tips, you can ensure that you’re making the most of your hard work.