You're determined to make 2019 the year you raise your credit score. Why not get off to a good start with these five New Year's resolutions to send your credit score in the right direction?
1. Resolve to Check Your Credit Report – All your efforts will go to waste if identity thieves have already ruined your credit by opening accounts in your name and racking up unpaid bills.
Check your credit report and look for any errors, rogue accounts, or fraudulent charges on your existing accounts. Address any problems as quickly as possible with the credit reporting agencies to limit the damage. Monitor your credit score regularly to gauge your progress and follow up with at least one more credit report check during the year. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
2. Resolve to Set A Budget and Stick to It – A reasonable budget is the key to prevent overspending that can harm your credit score. Lay out a long-term budget that covers all monthly expenses along with a few contingencies for unplanned bills (think car breakdowns or unplanned home repairs). If your income doesn't support the budget, look for places to trim expenses.
We suggest starting this resolution early. Holiday shopping is a great way to rack up excessive credit card debt if you don't have a solid budget. Also avoid opening new credit accounts just to get rewards, as you're likely to overspend and carry a balance – wiping out your rewards with interest charges.
3. Resolve to Keep Credit Utilization Low – Credit utilization is the amount of credit you're using compared to your credit limit. When you get close to your collective credit limits – or your limit on any individual credit card – your creditors see greater risk and your credit score will fall as a result.
To raise your credit score, keep credit utilization below 30%. Aim for 10% or less whenever possible. It's okay to put most purchases on a primary card to maximize rewards, but make sure you aren't damaging your credit score in the process by approaching your limits.
4. Resolve to Pay All Your Bills on Time – On-time payments are the greatest factor affecting your credit score. Make sure that all of your bills are paid on time, even if you can't pay them in full. Carrying a balance isn't preferred, but it's better than missing a payment altogether.
If you have trouble remembering when bills are due, consider setting up automatic payments for each of your bills – but make sure that you have sufficient money in your account to cover the bills. Know when automatic deposits are available for payment and when each of your bill payments is withdrawn from your account.
5. Resolve to Pay Down Debt – To pay down existing debt, your budget must have a surplus at the end of the month. If you have a monthly surplus, you're keeping expenses below your income – and that should have a positive effect on your credit score in a number of ways.
If you don't have any debt to pay down, that's even better. Use the surplus for an emergency savings fund, retirement fund contributions, or a special savings fund (perhaps a down payment for a future home purchase).
Why limit yourself to one New Year's resolution, especially where credit is concerned? Use these five resolutions to send your credit score to new heights in 2019 – and apply them immediately to keep the holidays from putting you in an early financial hole.
You can check your credit score and read your credit report for free within minutes by joining MoneyTips.