Make this year the year that you finally get your finances in order – and get your credit score in check, by following our 5 credit resolutions.
Get a Copy of Your Credit Report at Least Once a Year
If you think your credit score is poor, you need to order a copy of your report with some regularity so that you can monitor it. If you think your credit report is good, you still need to monitor it – just in case something is amiss that you’re not sure of. The first thing you should do this New Year’s is order a copy of your credit report. Order from one of the three major agencies, Equifax, Experian or Transunion, and be prepared to pay a fee. Although you are able to view the bare minimum of details online for free, you usually have to pay for a paper copy of your report. Once you have it, read through – then follow the tips below.
Analyze Your Report
Go through your report with a fine-tooth comb. Spend just an hour or two reading through everything, checking the facts, reading through the report line by line. Take note of things like your addresses, past addresses with credit agencies that you might no longer be dealing with, past accounts that may no longer be open and your name. Ensure that all of the data is correct and up to date and if you spot any discrepancies or any issues, speak to the credit agency or the individual company that made the error. Although it sounds silly, these small discrepancies can be what makes your credit score – or what breaks it. These days, it seems that creditors are looking for any excuse not to lend – so don’t give them the excuse! Make sure your credit report is bang up to date – and completely correct – to give yourself the best possible chance for being accepted for the credit products you want.
It sounds like an obvious tip, but if you don’t think you can afford a product, don’t buy it and don’t apply for it. Stay savvy with the way that you use money and spend money, and if you don’t think that you’re able to do that, set out a budget for yourself and stick to it. How much money do you earn? Write it down. How much are your bills? Don’t use a conservative estimate, either – overestimate instead. Once you’ve worked that out, sit down and figure out how much you have left once you’ve paid all of your bills. This is your disposable income. You should put some of that money into savings, and the rest will be used for food, cleaning items, clothes and leisure activities. What you can’t afford, don’t buy – but if you know that this isn’t realistic for you, do your borrowing in the most controlled manner possible. Use a low interest rate credit card and pay it off in full – or at least more than the minimum balance – at the end of each month. Don’t open store cards, either – they sound fantastic and they make it easy for you to buy all of your favorite things, but they’re really a very easy way to get into a lot of debt, and fast. If you do desperately want to buy something from a certain shop, buy it on your low interest credit card instead of on a store card. The idea is to pay as little as possible in the way of charges for the privilege of borrowing the money.
Set Up Direct Debits
Don’t trust that you’ll always pay your bills on time. Instead set up direct debits or automatic payments for every single account that you have, that needs to be paid each month with some regularity. Your gas and electric, water bill, broadband, cable TV, home phone, credit card, rent, mortgage – all of them should be paid monthly and automatically. Missing a payment and missing it frequently is absolutely the worst possible thing you can do to your credit score – even if you did pay it in full when you remembered to pay it. Be absolutely sure that your bills are being paid and you’ll never have to deal with a missed payment again. And remember – if you want to switch bank accounts, be sure to swap over all of your automatic payments at least a week or so before they’re due – just to make sure that they all go through in time.
Start an Emergency Fund
Many of us live paycheck to paycheck, simply because the money that we earn is the money that we need to live. But you can start an emergency fund, even on the smallest of paychecks. Without an emergency fund, the money you make each month could be wiped out with a faulty car, issues with your heating system or an unexpected medical bill. Take a look at the budgeting tip above, then work out how much you can set aside each week or month. Even if it’s only $5 or $10 a week, it’ll all make a difference. You can also use this system to set aside money for Christmas – after all, $10 per week equals $520 in a year – more than enough for Christmas presents for the whole family. If you can set aside even more, that’s brilliant – at the end of the year, if the fund hasn’t been used, you could then save half, then use the other half to take your family on holiday or for a special trip. That way, you get to enjoy the funds, rather than just saving and saving without seeing any rewards.
For more debt and credit advice, come back soon!