You know how important your credit score is, especially if you are hoping to buy a home shortly. But did you know that saving up for a vacation can boost your credit score? Here’s how.
Increased Motivation to Cut Expenses
If you usually carry a balance on your credit cards, saving for a vacation might be just the motivation that you need to pay that down finally. Almost a third of your credit score is based on the ratio of your credit limit to the debt you are carrying. Every time you opt not to buy something and keep the money instead, you can pay down your debt, boosting your credit score up.
A positive reward in sight, like a week on the beach, can get you to save instead of spend. Because the trip is something you care about you are more likely to sacrifice short-term pleasures, like an afternoon of shopping and spending with friends.
Research shows that people are more likely to save money when they have a defined intention. Create visual cues to remind you of the end goal. Put a seashell on your nightstand, or make the background of your phone into a beach scene. These constant reminders will keep you focused on your goal. Define your intention, and work towards your goal.
Open A New Line Of Credit
If you have a steady income, consider opening a new line of credit just for your trip. Search for a card with a high zero interest introductory period to prepare for your budgeted travel expenses. Make a plan for paying it back down to zero before the initial period ends. To do this, you need to know how much of the balance you will need to pay down each month.
For example, if you sign up for a new credit card with a 12-month interest deferral period, and go into 1,200 dollars of debt for your vacation, you will need to plan on paying back one hundred dollars a month afterward.
One easy way to do this is to set up an automatic deduction with your bank. This way, you don’t even need to think about it, and the payments will happen on time, every time! Creditors reward people who prove that they can manage multiple lines of credit. Also, paying down the debt on time will build your trustworthiness in the eyes of lenders. Payment history accounts for 35% of your credit score.
Having a high credit score can help you in many ways, including securing lending for a house. While you raise that score, you may as well have some fun. Take a budget-conscious trip. While you save for your travels, watch your credit score climb. Keep saving so that you can take the vacation without going into debt and damaging your score.
Written by guest author Jackie Edwards