New Year’s Resolutions for Better Credit

 

A new year always marks a new beginning, a fresh start. And part of this fresh start is making certain resolutions or goals to follow through on. Aside from getting healthier and joining a gym, the next most popular resolution is usually something financially related. And more often than not, a good financial situation and a good credit score tend to go hand in hand. That is, you normally cannot have one without the other. That said, why not make 2020 the year you get your credit score back in shape? Here are some resolutions that you can enact for better credit in 2020 and beyond:

Assess Your Financial Health and Set a Budget

The first step to boosting your credit score is to see where you stand. Do this by first checking your credit score or pulling your credit report, and then knowing your revolving debt, or the debt that continues month after month (i.e., credit card debt). One of the keys to a better credit score is low revolving debt. In fact, for a better credit score, you’re advised to keep your debt-to-credit ratio at or under 30 percent. This means if you have a credit card with a $10,000 maximum, you’ll have a higher score if your balance is at or less than $3,000 than you would if it was more than that. Revolving debt can quickly spiral out of control if you’re not careful, costing you lots in interest. It’s why you should be setting a budget and cutting expenses to ensure you can maintain as close to a zero balance as possible.

Build an Emergency Fund

It’s estimated that about 40 percent of all Americans wouldn’t be able to pay for an unexpected $400 out-of-pocket expense. That’s a problem, especially when you consider that using a credit card or taking out a loan to finance such could negatively influence your revolving debt and increase your debt-to-credit ratio. This is more of a preventative measure, but building up an emergency fund to tackle rainy day expenses can potentially help save your credit long-term. Most experts suggest having at least three months’ worth of expenses saved in such an account.

Other Strategies

Sometimes it’s the smallest things that can make the biggest difference, like paying your bills on time — which accounts for more than one-third of your overall credit score. You might even look into combining debt so that you have one, rather than multiple, monthly payments to make. This can be an especially attractive option now with how low interest rates are. And lastly, don’t be afraid to seek help if you need it. If your credit is in poor shape, a credit counselor may be able to help you get back on the right track.

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Last but not least, make sure that you’re checking your credit report at least once a year. It’s estimated that up to 25 percent of all Americans have some sort of error on their credit report, and discovery of such is the key to disputing it. After all, an error on your report could be contributing to a lower overall credit score. If you do notice an error, you’ll need to dispute the item with each of the three major credit reporting bureaus. You can do this either by phone, online or via mail. Make sure you have documentation to back up your dispute.

It’s estimated that about 80 percent of all Americans give up on their New Year’s resolution by February. But if you dedicate yourself to the cause, understand how important good credit can be and realize how easy some of the repair tips are to implement, you can be on the right path to an improved credit score in no time.