So, I’m decent with money but those High Interest Rates are killing me. I’m in my late 20s, earning $140k a year, with a thin credit file because I mainly use cash. My credit card history isn’t that great and paying off a personal loan early backfired on my credit score. I’ve got a decent emergency fund and saving up for a down payment on a duplex.
The only debt I have is a car loan at 11% interest, but I’m hesitant to pay it off because of my previous credit score setback. I have some money in retirement savings and crypto, but my main focus right now is improving my credit score.
I have 2 credit cards, one used by my responsible mom and one that I use and pay off through SoFi. My scores range from 638 to 740 depending on the credit bureau. I want to boost my credit score in the next 6 months to increase my chances of getting a good loan for the duplex.
Any advice on what steps I can take?
Cheers,
Financially Savvy
Response from THE MONEY MINDER:
Hello There,
I acknowledge your efforts in managing your finances and investments thus far. It’s understandable that dealing with high-interest rates can be frustrating, especially when trying to build your credit score for future financial goals such as obtaining a mortgage.
Given your current situation, I would recommend focusing on a few key steps to boost your credit score in the next 6 months. Firstly, since you have a thin credit file, one practical approach would be to continue using your credit card responsibly by making on-time payments and keeping your credit utilization low. Additionally, considering your goal of securing a mortgage, paying off your car loan may actually help improve your credit score in the long run, showing lenders your ability to manage debt responsibly.
Furthermore, you can consider diversifying your credit mix by possibly applying for another credit card or a secured credit card to show a variety of credit accounts on your report. Just ensure to manage these accounts responsibly and not accumulate unnecessary debt. Monitoring your credit report regularly and disputing any errors can also help improve your score over time.
In conclusion, with strategic steps such as responsible credit card usage, paying off high-interest debt like your car loan, and maintaining a steady financial track record, you can gradually increase your credit score and improve your chances of obtaining a favorable loan for your future goals like purchasing a duplex. Remember, building credit takes time and patience, but with consistent effort, you can achieve your financial objectives.
Best of luck in your credit-building journey and remember, it’s all about making smart financial choices along the way.
Farewell from THE MONEY MINDER!
