5 Focused Resolutions For Better Credit In 2014: Which One Is Right For You?
December 30, 2013One of the reasons New Year’s resolutions do not work is that they’re too general. Lose weight, for instance, tops the list every year. But without some specific, absolutely doable action tied to the resolution, it feels out of reach and, in turn, is quickly abandoned.
The same may be said of financial resolutions, like improving your credit. It’s a fine intention, but probably not specific enough to translate into tangible results. If you want better credit in 2014, review the following list of potential resolutions. You’ll likely know at a glance which one is right for you, but there is plenty of explanatory incentive included, just in case.
I will pay off my credit card balance every month.
Do you charge more to your credit cards than you can pay off within 30 days? Is your current credit card balance one that you could realistically pay off in the next month or two? Get that card (or cards) paid off and resolve going forward to only charge as much as you can cover with cash before the end of the month. You’ll not only avoid paying interest, but also improve your credit score, as your payment history will start to demonstrate an ability to effectively manage credit.
I will make more than my minimum credit card payment every month.
Do you owe a mountain of credit card debt that haunts you month after month, year after year? It’s time to start making a genuine dent in your credit card debt by resolving to make more than your minimum monthly payment. Do the math and increase your monthly credit card payment as much as your budget will allow. Try doubling it if you can. Even paying an extra $5 or $10 a month can make a difference, not the least of which is simply getting you into the habit of paying above and beyond what is required.
I will pay with cash instead of credit cards.
Do you use credit cards out of habit for just about everything? Do you find yourself spending more than you planned simply because you have enough credit on your card to do so? Does this often result in you having a credit utilization ratio higher than 30 percent? If so, it’s time to re-familiarize yourself with cold, hard cash.
Start using cash in the places you easily can — restaurants, the grocery store, the gas station, and anywhere else you normally pull out plastic. Now, this is not to say you should stop using your credit cards entirely. On the contrary, it is important to show activity on your credit card accounts. But this can be done with one or two transactions a month — making online purchases or paying a utility bill over the phone.
Favoring cash over credit will not only help you stick to your budget and keep your credit utilization ratio in check. It also help you minimize the risk of credit card fraud. At the very least, avoid using your credit (or debit) cards in outdoor payment kiosks at gas stations, parking lots, and ATMs, which thieves notoriously skim for credit card information.
I will resist the temptation to apply for new credit cards.
Do you apply for a new credit card every time you max out another? Do you apply for a new credit card every time you’re offered a discount for doing so? Do you know your credit is bad, but you keep applying for cards anyway, hoping that one of these days you’ll be approved?
Stop it! Every time you apply for a new credit card, it counts a little bit against your credit score. Not enough to deter an application now and then, but certainly enough to hurt your credit if you’re applying for new cards all the time.
Then, of course, there is the long term damage you’re doing to your credit, as well as your bank account, if you apply for new cards every time another one gets maxed out. You’re just burying yourself deeper under a mountain of debt that will only become increasingly difficult to pay off. As for those discounts offered to you in exchange for a credit card application, whatever you save off your purchase could pale in comparison to the price you’ll pay for having another credit card you don’t need but can’t resist maxing out.
I will start the debt validation process.
Do you get collection letters for debt that’s gone into default? Is much of this debt several years old? There’s a chance you could have this debt wiped clean via the single most powerful credit repair tool — debt validation. If a creditor demanding payment from you cannot prove you owe the debt, then you are not legally responsible for it and it must be removed from your credit report. This can prove an invaluable technicality in cases where your debt has been sold to third-party collectors, as documentation proving you owe the debt is often not passed from one party to the next.
Start the debt validation process by requesting free copies of your credit reports. These are available to you through AnnualCreditReport.com. Through this website, you can request a free copy of your credit report from each of the three major credit reporting agencies every 12 months. Yes, you need all three, as each agency has a separate credit report and score on file for you.
Go through your credit reports with a fine-tooth comb. Make note of every negative listing, as these are the items for which you will request debt validation. Your requests should be made in writing to each respective credit bureau. Sample debt validation letters and more detailed instructions may be found at CreditInfoCenter.com.
What do you think? Any other resolutions for better credit you’d add to the list? Leave them in the comments section below.
This entry is a guest post by Meredith Simonds, the personal finance blogger for Credit Info Center. Check them out on Facebook. You can follow her on Twitter @creditinfocentr and on Google+