Last Updated on September 13, 2023 by Lori Pace
It’s no secret that being a single mother can be daunting, especially when it comes to managing finances. Balancing work, childcare, and daily expenses can sometimes leave little room for focusing on your credit score. However, building and maintaining a healthy credit score is crucial to securing better financial opportunities, such as loans or mortgages. If you are a single mother looking to experience financial freedom, here are six strategies to help you shore up your credit scores.
1. Open A Credit Card
Opening a credit card may sound counterintuitive for single mothers trying to improve their finances. However, this can be a powerful tool when used responsibly.
Establishing a line of credit helps build your credit history, which is a significant factor in determining your credit score. The secret is to choose a credit card with no annual fees and a low interest rate.
Once you open a credit card, you can use it for small, manageable expenses and promptly clear the balance in full each month. This timely payment history will help increase your credit score over time.
2. Pay Down Debt To Shore Up Credit Scores
Paying off debt should be a priority when trying to improve your credit score. High-interest debt, including credit card balances, can accumulate quickly and become a financial burden.
By focusing on clearing your loans, you’ll save money on interest payments and reduce your credit utilization ratio. The credit utilization ratio is the value of revolving credit you use compared to your total available credit. A lower ratio is better for your credit score.
When tackling loans, consider using the “debt avalanche” method. This strategy involves paying off high-interest loans first while making minimum payments on other debts.
3. Monitor Your Credit Report
It’s essential to review your credit report regularly to ensure its accuracy. Errors in your report can negatively impact your credit score.
By law, you’re entitled to one free credit report annually from each of the three major credit bureaus; Experian, Equifax, and TransUnion. So, monitor these reports carefully and dispute any inaccuracies you find.
Being keen on your credit report will help you stay informed about your financial situation and give you the necessary information to make better financial decisions.
4. Create And Stick A Budget To Shore Up Credit Scores
Budgeting is crucial for staying on top of your finances and improving your credit score. You can start by listing all your monthly income sources and expenses and then allocate funds to each category.
The goal is to ensure your expenses don’t exceed your income. If necessary, cut back on non-essential expenses to help save money. Once you’ve created a budget, ensure you stick to it. Consistently managing your finances and staying within your budget will help prevent late payments, which can damage your credit score.
5. Build An Emergency Fund
An emergency fund can be a financial safety net, protecting you from unexpected expenses like car repairs or medical bills. Having this fund in place can prevent you from relying on credit cards or loans to cover these costs, which can negatively impact your credit score.
Ideally, aim to save at least three to six months’ worth of your total living expenses in a separate savings account. However, if saving that much seems daunting, start small and gradually increase your contributions over time.
6. Reach Out To Creditors
If you struggle to make timely payments, contact your creditors and explain your situation. Many creditors may be willing to work with you to create a modified payment plan or temporarily lower your interest rate. That can help you avoid late payments or defaults, which can severely damage your credit score.
Additionally, if you’ve already missed a payment, you can ask your creditor for a “goodwill adjustment.” Listening lenders can be willing to remove the late payment from your credit report, which can help boost your credit score.