If you’re looking to improve your credit and overall financial health, a solid budget is an essential tool. Budgeting helps you save money to avoid overspending, pay down your debt and make sure your bills are paid on time. All of this when done correctly, can boost your credit score and help you achieve healthier finances.
How Can Budgeting Improve Your Credit
Budgeting helps manage your money and keeps track of spending, but what does that help you improve your credit?
For starters, a budgeting helps to avoid late payment. Keep in mind, your payment history is the number one most important factor that influences your credit score. It's important to pay on time because this remains on your credit report for sever years. Having a budget keeps your aware of your monthly bills so that you can help keep track of those payments.
Credit utilization and total debt level are also major contributors to your credit score in which a budget can help you to manage as well. Another great thing about having a budget is, you avoid overspending. When you stick to your budget, you don't have to worry about running up the balance on your credit cards which can ruin your credit utilization rate. You can also identify areas in which you can allocate toward paying down high interest debt.
Lastly, your cash flow is an important factor to getting approved for credit and how much lenders feel comfortable letting you borrow. Creating a budget will help you manage your cash flow. If you max out your budget, lenders may not be as willing to loan you more credit.
If you need a place to start with your budgeting journey, check out this book written by author Brittney Brown. She offers great tips and strategies that can be used to build a fool-proof budget. If you order through our website, you'll also receive a FREE budgeting workbook to help you build and track your budget for a year.