What are the real differences? Here is the answer.
When trying to improve your credit score, you must manage multiple avenues for the best results. This involves straightforward measures such as increasing your credit limit and lowering your credit card outstanding amount. Making your payments on time also stands tall in terms of simple yet effective actions to lift your credit score.
But that is where the tricky part comes in. When making your payments, you need to determine whether partial or full payments are better for you. To help you navigate through this, here’s a guide on paying in partial vs. full payments.
What Are Partial Payments?
Partial payments describe a payment that is less than the total outstanding balance on a lending product. For credit cards, partial payments may refer to paying the minimum due or a slightly higher amount every few months.
Partial payments are important because they essentially let you make your payments on time and maintain your credit score. This is especially helpful when you don’t have the means to make full payments every month.
What Are Full Payments?
As described by their label, full payments refer to paying off the full amount of outstanding debt. This means that if you have a credit card, you pay all the amount you utilized in your monthly statement.
This approach requires you to be quite diligent in everything you do. The reason why you must be rigorous is because you must account for each debt. Your goal is to ensure that you pay everything off monthly. That will take quite a bit of discipline and mental fortitude.
Remember that ensuring to make full payments can help you to show that you are a reliable borrower. If you pay off your credit cards regularly, you will certainly have a great score.
Why? The reason why is because it will show that you have a low credit utilization. We all know that low credit utilization means that you have lower total debt. The lower the overall debt that you carry, the better you look.
Eliminate Potential Missed Payments
Getting your debt paid down faster helps eliminate potential missed payments, and you will find that you are much better off. Now, why is that? How will you become better off? The truth is that if you do not have a history of missed payments, you are robust. It will show that you are one individual who understands their debts and can make timely payments.
If you make payments on time, lenders know that they can count on you to regularly send money. In essence, it shows that you are trustworthy and reliable.
Pay off High Interest Debt
The most straightforward way for many people in regard to clearing out debt is to target high-interest debt. If you continue to prioritize high-interest debt, you will find that you are in a better shape. While this may feel like it takes more work, it can pay off in the long run as you will pay less interest!
These are a few tips to help you become a conscientious borrower and will increase your credit score.