How to Make Your Money More Valuable

“Money makes the world go around.” That classic phrase is still as relevant as ever. But having enough money to make your world turn doesn’t always depend on earning it.

Putting yourself in a better financial position is also achieved by taking the right steps to improve your credit rating and free up cash each month. In fact, there are several ways you can make the money you receive go farther. It’s going to require you to focus on managing expenses, minimizing your debt, and improving how you look to lenders.

Let’s look at some of the key steps you can take and how you benefit from these efforts.

How to Become Financially Healthy

Raising your credit score is super important to stretching your dollars. Although in some cases it may take a few months to increase your score, the result will put you in a much better position when you need to save money on credit products like a mortgage.

So, first find out why your score is where it’s at (learn about what goes into your score). You can request a free report from each of the major credit rating companies – Equifax, TransUnion, and Experian – once per year. There may be errors or fraudulent records on there, which you have the right to dispute, so it’s important to stay on top your reports.

Then take the necessary steps to raise your score. Here are a few ways you can gain valuable points.

Pay Bills on Time

No strategy to improve your credit is going to work if you pay your debts late. Payment history is the single biggest factor that affects credit scores, and late payments can remain on your credit reports for over seven years.

If you do miss a payment by 30 days or more, contact the creditor immediately and commit to getting current on your debt. A timely payment history will make lenders, landlords, and other creditors more comfortable if you need to borrow money.

Make Multiple Payments Monthly

Credit utilization is another important factor in your score. If you’re able to keep your utilization low each week instead of letting it build toward a payment due date, your score should improve.

Credit cards are a big factor, so if you’re able to make small payments on them throughout the month, it keeps your credit utilization ratio — the relationship between your card balances and limits — low and will have a big influence.

Paying loans early each month also helps improve your utilization ratio.

Keep Credit Cards Open

Although you might be tempted to reduce your revolving credit, it’s not always the right move. Closing credit cards can make improving your score harder. Closing a credit card removes that card’s credit limit when your overall credit utilization is calculated, which can lead to a lower score. So keep your credit card accounts open when you can, just use them occasionally (and pay off the monthly balance) so the issuer won’t close it.

Borrow From the Same Lender

You can save money by using the same lender for multiple credit and banking products. Banks appreciate it when you borrow, use, and save money responsibly, so some offer interest rate discounts for multiple loans or if you also have a checking account or savings account with them.

Achieve a Good Debt-to-Income Ratio

Lenders look at your debt-to-income ratio (DTI) when they determine your creditworthiness. Do you know the percentage of your monthly income goes to pay debts – and what a good ratio is? If you do then you can take steps to lower your ratio, make you more attractive to banks, and get more from your money.

Calculating Debt-to-Income Ratio

Add up your total recurring monthly debt obligations (credit cards, loans, overdue taxes – basically, long-term expenses) then divide by your gross monthly income (the amount you earn before taxes and other deductions).

What is a Good Debt-to-Income Ratio?

According to the US Consumer Financial Protection Bureau, an attractive DTI is about 43 percent, which is the highest ratio a borrower can have and still get a qualified mortgage. However, some lenders may offer you a mortgage or loan with a slightly higher DTI. But there may be requirements and limitations beyond the terms of a qualified mortgage.

Lenders look for low debt-to-income (DTI) figures because they often believe these borrowers with a small debt-to-income ratio are more likely to successfully manage monthly payments.

However, it doesn’t stop there; obtaining the card is just the beginning. Use it responsibly and the way it is intended; don’t overextend yourself where you will be unable to pay the bill in full each month and stick to your plan, whether it’s building credit or earning rewards. Handled incorrectly, your perfect card will no longer be the perfect card for you, and you could watch your credit score disappear as quickly as the card in a magician’s trick!

Financial Security

Financial health is often less about the bottom line than about having financial security with freedom to make choices. When you’re in control of your finances, it is easier to make forward-thinking decisions such as retirement goals. You’re also more comfortable with long-term obligations like mortgages.

Another benefit of financial security is positioning your money to be able to handle any curveballs that may come at you such as job loss, long-term illnesses, or challenging economic times.

So, take the time to get your financial house in order. Doing some hard work now will pay off in the long run, putting you in a position to have greater freedom, happiness, flexibility, even authority. The results of your efforts over time will leave you with more money – and more options.

t will get your life in a place where you can be more content, less stressed, and enjoy a life you imagine.