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The beginning of the year is the perfect time to take stock of your finances to make sure you are on track for the year, especially after spending so much money during the holiday season. If you are going into the new year with less-than-stellar credit, or just want to give your good credit a tune-up, there are some easy steps you can take to get on the right credit track.
First things first, you need to know what your credit situation is before you can do anything about it. Getting your credit score from sites like Credit Sesame or Credit Karma can help, but neither one shows you your true FICO score, which is the score lenders use. Some credit cards will give you a free FICO score with your bill each month. Or you can go to MyFICO and pay to see your FICO score.
While having your score may give you a good idea of what kind of shape you are in, what you really need to see are your credit reports. You have three credit reports from the three main credit bureaus (TransUnion, Experian and Equifax), and by law, you are able to receive a free copy of each report once a year. Go to annualcreditreport.com and get your three credit reports.
Then sit down and go through those reports and find out where you are having issues with your credit, whether it’s late payments or high debt. Once you have a better idea of where the problems are, you will be able to make a better plan to fix them. Legitimate credit repair companies can also help you figure out where the problems are and do the heavy lifting of contesting negative items on your reports.
One of the main factors of your credit score is your credit utilization ratio, which basically takes your total credit limit from all your credit cards and compares it to your total balances, showing how much of your credit you are currently utilizing. The lower the credit utilization ratio, the higher your credit score will be. There are basically two ways to lower your credit utilization ratio:
This doesn’t necessarily impact your credit score, but it can help you get credit card debt under control. Most people don’t know the interest rates they are paying on their credit cards, which can be dangerous, because if you have a high interest rate and you are only paying your minimum balance every month, the majority of your payment may be going to your interest rate, making it nearly impossible to pay down your debt. There are two good ways to get your credit card interest under control:
One of the main things people don’t realize is that you can have errors on your credit report that may be dragging down your credit score. Some errors can be simple, like misspelling your name or having the wrong address, but there can be errors in how lenders are reporting to the credit bureaus, and those errors should be fixed immediately. There are two ways to get errors fixed on your credit report:
While it may end up being some work to get your credit in order, having a clean credit report will give you better peace of mind going into the new year.