If you’re like most Americans, the New Year brings about renewed hope, a fresh start and the good intentioned News Year’s Resolutions. A poll by TD Ameritrade found that health and self-improvement resolutions swamped financial resolutions for 2013.
But according to Fidelity Investments, a record 46% of Americans will make a New Year’s financial resolution for 2013. Whatever your resolution, if your credit needs improvement, here are 6 actions to take in 2013 to improve credit scores.
1. Check your credit report. Fixing your credit calls for knowing what may be affecting your credit. There is no excuse for not checking your credit report because you can get it for free every 12 months at www.annualcreditreport.com.
2. Get your credit score. Know where you stand in the eyes of banks, lenders and credit card companies. Unfortunately www.annualcreditreport.com does not offer credit scores for free. However, you can enroll in a program, like Equifax Score Watch which offers real credit scores; the one used by lenders, for a fee, along with monitoring and alert services.
3. Fix Negative Information. When you discover inaccurate or negative information in your credit reports notify and dispute the credit bureaus first; and if that does not work, dispute directly with the furnisher of the information. Develop a plan to deal with negative information in order to minimize the damage and never ignore negative information unless it is older. In the case of older negative information, it is not significantly affecting your credit score.
4. Lower credit card balances. Raise your credit score by lowering your utilization rate. How much you owe accounts for 30% of your credit score. If you pay most of your credit card bill before the statement date, you can lower your utilization rate because typically, the balance as of your last statement date is the balance that will report to the credit bureaus.
5. Make multiple payments. Another way to lower the balance is to make multiple payments throughout the month. Cut the amount of credit you are using by paying off any purchases you make through the week. The number you really want to get to when it comes to credit utilization is 10%. Insight on consumers with excellent credit scores was provided by MyFico.com, the consumer division of FICO, the company that invented the most widely used credit score, and most had a credit utilization of 7% or lower. But 10% was set as a decent threshold for consumers to use as a guide.
Increasing the amounts of your monthly payments until all balances are below 10% of your credit limits will improve your credit scores. Once the payments show up on your credit reports in the form of a lower monthly balance, then the new balance will factor into the next calculation of your credit scores.
6. Get a credit card. Consumers needing to improve credit scores should have something the credit bureaus can use, besides negative information, to calculate a credit score. You may need to get a credit card to rebuild or improve your credit. One way to do this is to get a secured credit card or an unsecured credit card that does not require you to have good credit.