WinCU Family & Friends Blog
TIPS - Use Your Tax Refund to Raise Your Credit Score.
According to CNBC…the average 2016 tax return for individuals living in Wisconsin was $2,350!
I can think of many uses for $2,350 – a warm weather vacation sounds great right about now. But, for individuals looking to raise their credit score, a tax refund used successfully, will set you up for future savings.
Here are three useful tips to using your tax refund to raise your credit score:
Catch up on late payments. 35% of your credit score is payment history, which is greatly impacted by recent late payments. So, bring all late payments current and maintain that going forward.
Pay down credit cards. 30% of your credit score is based on how much you owe compared to available credit. For revolving credit (credit cards) this is referred to your borrowing capacity. To make math simple, lets say you have $10,000 in limits on credit cards and you currently have $8,000 in balances. This means you are at 80% borrowing capacity. The lower this number the better, preferably under 30/40%. Paying off balances will lower your ratio and raise your credit score.
Can’t get a credit card. If you have a poor credit history, Winnebago Community Credit Union can help. Use your tax refund to get a secured credit card. As mentioned in tip two; credit-reporting agencies look at your revolving usage to help determine your credit worthiness, demonstrating you can be responsible with a credit card. So, the tip is to get a secured card and use it for purchases but make sure your payments are on time and don’t go over the 40% usage ratio. Over time, this action will help you build a better credit score.
A good credit score will save you money in the future on loan rates, car insurance even help you get into the apartment you want. So invest your tax return wisely and set yourself up for even more money in the future!