Credit Tips to Help Meet Your New Year's Resolution
Have you decided to put "credit monitoring" on your list of New Year's resolutions? These credit tips might help you save money on credit cards, loans, or maybe even a mortgage on a house.
The end of the year is a great time to look at your finances and your goals for the year to come and beyond, and to make "course corrections" in how you’re managing your money. Are you happy with the way your credit looks now and the rates you're able to get? If so, more power to you! But if you'd like to see some changes for the better, or be offered lower mortgage and credit card rates, this is an excellent time to pursue that by using these credit tips.
Start where you are
Just as maps help you find your way with "You are here" designations, see where your credit is right now, even if after the holidays there's a little "ouch" involved. Check your credit today and review the past 6 to 12 months to see how you've been managing it and decide on any changes you’d like to make.
Maybe you already have excellent credit and very little debt and your goal is to buy a new home or to refinance one. Or maybe you wish to pay off significant debt, or change the way you use credit. Regardless, setting goals and clarifying them means you’re serious about reaching them. So set an objective for your finances with respect to credit and then figure out how to achieve it.
Lower the Amount You Owe
You can significantly alter your debt-to-income ratio with less outstanding debt. The percentage of your income that goes to debt plays a critical role in determining your credit score (and by extension, your rates). Most of us can’t quickly increase our income (although we might want to) but paying down existing debt will achieve the same affect.
Be selective about opening accounts
Only apply for and open new credit accounts that you need. Remember that every application for credit means your credit scores take a temporary ding. Opening accounts just to have a "better credit mix" will likely not make your credit score look any better.
Be selective about closing accounts
Closing a credit card account, even without a balance, can negatively affect your credit score. If you are considering applying for a mortgage, you’re better off leaving your credit card accounts open, particularly accounts you’ve had for years. The length of your credit history contributes to your score, so by closing older cards you’re lowering the average age of your credit lines.
New habits generally take at least 30 days to establish, so why wait until the New Year to implement these simple credit tips? Don’t let credit monitoring become one more resolution you didn’t keep.
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