TomoCredit, the financial wellness platform that helps immigrants and other underserved groups get access to essential credit without a credit score, announced today a simple & straightforward 5-week plan to boost consumer credit before the holiday shopping season begins for consumer awareness.
With the holidays around the corner, repairing a less-than-stellar credit score can give shoppers access to better financing options and relieve some financial stress during the biggest spending season of the year. Based on Tomo’s recent data, a bad credit score will cost the average American an estimated $150,000 alone over their lifetime.
Here’s their advice that anyone can start using now:
Week 1: Review Your Credit Report and Dispute Any Errors
Start by checking a free credit report from the three major bureaus (Experian, Equifax, TransUnion). Look closely for errors, like incorrect balances, payments, or accounts that don’t belong to you. A recent Tomo study found that 40% of respondents had errors on their credit report. Disputing errors is a straightforward process through each bureau’s online portal and can make a significant impact on your credit if the error affects your score. Simply correcting these issues can often improve your score in just a matter of days or weeks.
Week 2: Pay Down High-Balance Cards
If you’re carrying high balances on one or more cards, focus on paying these down. Credit utilization is a key factor in your credit score, so aim to get your balances below 20% of your credit limit on each card. Prioritize paying down the cards with the highest interest rates or balances. Every dollar you reduce in credit utilization helps your score – so even small payments here can make a large impact quickly.
Week 3: Settle Small Outstanding Debts
Check your credit report for any small debts, like unpaid bills or overdue payments that have gone to collections. If you can afford it, settle these accounts now. Reach out to creditors to negotiate “pay-for-delete” deals, where they agree to remove the negative mark from your credit report if you settle. This can immediately impact your score by eliminating derogatory marks.
Week 4: Avoid Opening New Credit Accounts
While it might seem like a new card could help with holiday purchases, new credit inquiries can actually lower your score, at least temporarily. Lenders look at recent hard inquiries as a sign of increased financial risk. Keep your focus on managing current accounts wisely, and hold off on applying for any new credit until your score has improved.
Week 5: Make Consistent On-Time Payments
For a final boost, ensure every bill gets paid on time. Set up reminders or automatic payments to avoid missing due dates. Consistently paying on time shows lenders you’re a reliable borrower, and it’s one of the most effective ways to increase your score quickly. If you can, make an extra payment toward any remaining high balances.
As you approach the holidays, continue to keep your credit card balances low. High holiday spending can negate your efforts, so try to keep holiday purchases within your budget. Avoid maxing out your credit cards to preserve the gains you’ve made in the past five weeks.