Yes, we all want a fantastic credit score. It unlocks better interest rates, opens doors to dream apartments, and can even impact your job prospects. But building good credit takes time, right? Not entirely. The 90-day credit score challenge is a tactic gaining traction, promising a significant boost in just three months. So, is it realistic?
The Credit Score Reality Check
While dramatic improvements in 90 days are uncommon, progress is definitely possible. Credit scoring considers several factors, with credit utilization (the amount of credit you’re using compared to your limit) being a major one. By strategically tackling this factor, you can see a positive shift.
Understanding The Credit Score
Think of your credit score as a report card issued by credit bureaus like Equifax, Experian, and TransUnion. These bureaus track your borrowing habits, assigning a grade based on factors like:
- Payment History (35%): This is the most important factor. Consistent on-time payments are your golden ticket to a stellar credit score. A single late payment can leave a nasty mark, so prioritize timely payments above all else.
- Credit Utilization Ratio (30%): This refers to the percentage of your available credit limit you’re actually using. Ideally, keep this below 30% – the lower, the better. Maxed-out cards are a major red flag to lenders.
- Credit Mix (10%): Having a healthy mix of credit products, like credit cards and installment loans (e.g., car loans), demonstrates responsible credit management.
- Length Of Credit History (15%): The longer your credit history, the better. Don’t close old accounts unless absolutely necessary, as it shortens your credit age and can negatively impact your score.
- New Credit Inquiries (10%): Applying for multiple loans or credit cards in a short period can trigger a slight dip in your score. Apply strategically and only when necessary.
Best Websites To Check And Build Your Credit Score
The 90-Day Credit Score Challenge: Your Action Plan
Now that you understand the scoring system, let’s get down to business. This 90-day challenge is designed to tackle each metric and supercharge your credit score. Here’s your roadmap to financial freedom:
Phase 1: Analyzing and Taking Action
1. Track Your Spending
The first step to conquering any problem is understanding it. Where is your money going? Utilize budgeting apps like Cleo or YNAB to track every expense, from daily lattes to monthly bills. Identifying spending patterns empowers you to make informed choices and free up resources for debt repayment.
2. Craft Your The Killer Budget
Now that you have a clear understanding of your spending patterns, it’s time to create a realistic and empowering budget. This isn’t about deprivation, but about making smart choices that align with your financial goals. Consider the 50/30/20 rule as a starting point:
- 50% Needs: Allocate this portion to essential living expenses: rent/mortgage, utilities, groceries, transportation.
- 30% Wants: This is your “fun money” category for entertainment, dining out, hobbies, etc. Be honest with yourself about where you can trim back to free up more resources for debt repayment.
- 20% Savings/Debt Repayment: This is the heart of this phase! Commit at least 20% of your income towards paying down your credit card debt.
Remember: This is just a starting point. Adjust the percentages based on your individual circumstances.
3. Slash Unnecessary Expenses
Slashing unnecessary expenses isn’t about deprivation, it’s about optimizing your spending to free up resources for the things you truly value. It’s about taking control of your finances and making your money work for you.
What it is about:
- Financial freedom: Having more money to invest, travel, pursue hobbies, or simply reduce stress.
- Conscious spending: Making intentional choices about where your money goes.
- Living within your means: Avoiding debt and building a secure financial future.
Red Flags To Consider (Things You Might Not Realize Are Unnecessary):
- Impulse purchases: Avoid buying things you don’t truly need or haven’t researched.
- Subscriptions you don’t use: Review all your subscriptions (streaming services, gym memberships, etc.) and cancel unused ones.
- Recurring fees: Check for bank fees, phone plan overages, or unused services you’re paying for.
- Dining out excessively: Cooking at home is significantly cheaper than eating out. Consider takeout as an occasional treat.
- Brand loyalty without comparison: Explore generic brands or store brands for everyday items.
- Keeping up with the Joneses: Focus on your own financial goals, not what others have.
By taking a positive and mindful approach to spending, you can free up resources for the things that truly matter and create a more secure financial future.
4. Prioritize High-Interest Debt
Credit card debt can come with varying interest rates. The higher the interest rate, the faster your debt grows. Let’s tackle this strategically! Focus on paying down the card with the highest interest rate first. This approach minimizes the interest charges you accrue and allows you to see faster progress, keeping your motivation high.
Think of it like this:
- You owe $2,000 on a credit card with a 20% interest rate. This means the interest alone is costing you around $40 per month! (Yikes!)
- You owe $5,000 on another card with a lower interest rate of 10%. The interest on this card is around $42 per month.
While the $5,000 debt seems bigger, the high-interest rate on the first card is actually costing you more money each month. So by paying down the first card faster, you’re saving yourself money in the long run. Plus, seeing that $2,000 debt disappear quicker will be a huge win that keeps you motivated to tackle the rest!
Remember, Phase 1 is all about taking control. By meticulously tracking your spending, crafting a budget that empowers you, and prioritizing debt repayment, you’ll be well on your way to conquering those credit card balances and achieving lasting financial freedom. Stay tuned for Phase 2, where we’ll tackle another key factor impacting your credit score – Credit Utilization Ratio!
Consider A Side Hustle
Here’s why side hustles rock:
- Extra Cash, Faster Payoff: Every dollar earned weakens your debt. It’s like a double punch, knocking it out quicker.
- Turn Skills Into Cash: Good at writing, coding, or baking? Platforms like Upwork and Etsy let you use those skills to earn real money, all while battling debt.
- Do What You Love, Earn Big: Dog walkers can earn $15-$20 per walk, and photographers can charge $1,000+ for weddings. Find your passion and turn it into serious debt-fighting income.
- Work When You Want: Fit your hustle around your life. Early mornings? Late nights? Weekends? You call the shots.
Explore the world of side hustles! Platforms like Upwork and Fiverr offer opportunities for freelancing your skills.
Phase 2: Utilization Under Attack! (30 Days)
Remember the “don’t max out your credit cards” advice? Here’s why it matters. Credit Utilization Ratio (CUR) is a major player.
- Request A Credit Limit Increase: If you have a good payment history, consider requesting a credit limit increase on your existing cards. This increases your overall available credit, lowering your CUR even if you spend the same amount. (Be responsible – don’t use the increased limit as an excuse to spend more!)
- Strategize Card Usage: Spread your spending across multiple cards to avoid maxing any single one out. This keeps your overall CUR in check. (Just make sure to stay on top of all your minimum payments!)
- Pay Down Balances Before Statements Close: Your CUR is based on the reported balance on your credit card statement. Make a strategic payment just before your statement closes to temporarily reduce your utilization.
Phase 3: Building Your Credit Foundation (30 Days)
A strong credit score is like a diversified investment portfolio – it shouldn’t be all in one place. Here’s how to expand your credit mix and boost your credit score:
Become An Authorized User (Carefully!)
- Leverage Responsible Credit Users: You can piggyback on someone else’s good credit history by becoming an authorized user on their credit card. However, choose wisely! Their late payments become your credit score kryptonite.
- Find Your Credit Card Sidekick: Look for a friend or family member with a history of responsible credit card use. Be upfront about your goals and explain the potential impact on their score if they miss payments.
Pay Bills On Time – Like, Clockwork! (Throughout The Challenge)
This might seem like a no-brainer, but on-time payments are the single biggest factor affecting your credit score. Here’s how to be a payment ninja:
- Set Up Payment Reminders: Utilize online banking features or calendar alerts to avoid missing due dates.
- Consider Automatic Payments: Set up automatic payments for at least the minimum balance on all your credit cards and loans. This ensures you’re never late, even if you forget.
Dispute Like A Boss! (Throughout The Challenge)
Sometimes, even the best financial warriors encounter errors on their credit reports. A mistaken late payment here, a mysterious debt collector there – these inaccuracies can seriously drag down your score. Don’t be afraid to dispute any errors you find!
- Obtain Your Free Credit Reports: Visit Experian’s website and navigate to the section on free credit reports. There you can register for an Experian account to access your report.
- Review Reports Meticulously: Look for discrepancies like incorrect account information, late payments you didn’t make, or debts that don’t belong to you.
- File A Dispute: If you find errors, file a dispute online directly with the credit bureau or through AnnualCreditReport.com. Be sure to include documentation to support your claim (e.g., receipts, bank statements).
Bonus Step: Pro Power-Ups (Throughout The Challenge)
- Use A Secured Credit Card: If you have limited credit history or a bad credit score, consider getting a secured credit card. This type of card requires a security deposit that acts as your credit limit. Use it responsibly and make your payments on time – it’s a great way to build a positive credit history.
- Get Credit For Rent and Utility Payments: Some credit reporting agencies allow you to report your rent and utility payments to your credit score. This can be a great way to boost your credit score if you have a good track record of paying these bills on time. Check with your rental company or utility providers to see if they offer this service.
Conclusion
Building a good credit score takes time and effort. But with these actionable steps, dedication, and a little financial discipline, you can see a significant improvement in just 90 days. This challenge is about taking control of your financial future, one strategic move at a time. So, buckle up, grab your metaphorical financial battle axe, and get ready to conquer your credit score!
FAQs
Pay down balances, dispute errors on your credit report, avoid new credit inquiries, and consider becoming an authorized user on a creditworthy account.
Pay bills on time, reduce credit card balances, avoid opening new credit accounts, diversify credit types, and monitor your credit report regularly.
Build a positive payment history, manage credit utilization, limit hard inquiries, keep old accounts open, and pay down debt.
Minor boosts are possible by paying off small balances, disputing clear errors, or requesting a credit limit increase
