Get a Fresh Start in the New Year

The start of a new year is also a great time to get a fresh start on your credit… in fact, once those Christmas bills start rolling in, many of us will be looking long and hard at all kinds of ways to cut expenses! Interest rate too high? Maybe it’s time for a different credit card with a low introductory rate! Too many open balances? Consolidate them into a personal loan! Want to pay off lots of small balances? Why not get a balance transfer card and combine all those little credit cards onto one credit card? Look for the one with the lowest interest rate, the best balance transfer terms, and the longest introductory period!

New Year’s is also a great time to do an overall review of your finances, too. Personally, I am beginning to gather the materials for my tax returns and I’m planning my budget for the new year, setting goals, studying where I can save money, etc., so this is the perfect time for me to do my annual review of my credit cards, credit lines, open balances, and so forth. It’s also the perfect time for me to decide if I need to transfer a balance, update a personal loan, or even refinance my house or car.

But what if your credit is not so good? What if you really need to work on your credit score? Well, the good news is, it’s also a great time to get a fresh start on your credit score! Let’s face it, most of us take a little hit on our credit score every December when we use those credit cards to do our Christmas shopping! So, most of us are looking to improve it after the holidays… Why not start working on yours right now?

Clawing Your Way Back Up

You know, when your credit score is really bad, it can seem like there is no point whatsoever in trying to improve it.  You know what I’m talking about, how many times have you or someone you know made the simple statement, “My credit score is so bad, I’ll never be able to buy a house (or a car, or anything else).”   The truth is, it can be daunting when you think about clawing your way back up to a decent credit score, especially if you’re starting at the bottom of the credit pit.  And sadly, that alone is enough justification for some people to just give up, accept that they will have damaged credit forever, and never do anything to change it.  But it can be done.

That’s right, no matter where you are on the credit scale, you can claw your way back up to a good or even an excellent credit score, as long as you are determined to work on it.  Note that I said determined and work.  Regardless of what anyone tells you, improving your credit score will take a lot of determination, a lot of work, and a certain amount of time.  But, if you never start the journey, then you will never get to the destination that you have in mind.

So where do you start?

First and perhaps foremost, you need to take the time to review your credit report, find out what your credit score is, and then make a plan for improving it.  And, by simply using the  technology at your fingertips, it’s really easy to get your credit score and your credit report at no cost, sign up for credit monitoring and protection, and keep a close eye on your progress.  (Some scores are updated weekly, some monthly, and a few quarterly.)  Once you know your credit score, depending on what range you fall into, you can start improving it by opening new accounts to increase available credit, paying down debts to get below the 30% credit utilization, or disputing things that are wrong on your credit report.

Now, if your credit score is really low, your choices will be limited when it comes to signing up for new (or even any) accounts.  But, keep in mind that there are a lot of other people who are in the same boat that you’re in, so there are options to start rebuilding your credit.  The most popular options are secured credit cards and catalog shopping cards, and there are companies that will work with you to make sure that you get the credit you need to start clawing your way back up the ladder… but, just like I mentioned in the beginning, if you don’t start, you’ll never get there.

Here are a couple of options to start rebuilding your credit today:



Don’t Be Rejected for Loans or Credit Cards!

Your credit score could literally kill your deal the next time you’re ready to buy a new home, vehicle, or other big ticket item!  That’s right, a poor (or even a fair) credit score might hurt your chances of getting a loan, or if you’re fortunate enough to be approved for a loan, your interest rate, fees, and even your closing costs could be significantly higher. Your credit score also affects your credit card interest rates, insurance premiums, and even your employability. Why? Put simply, the lower your credit score, the greater the risk that you represent for the lender.

Over time, the additional personal finance charges really add up, especially with your credit cards, as we normally utilize credit cards as revolving accounts, carrying an account balance on them month after month, never quite paying them off before we charge something else to the card. And, with credit cards especially, the length of time that you carry a monthly balance can literally be years! (Don’t believe me?  Look at your next credit card statement…new credit card regulations require this to be on your monthly statement.)

Obviously, the best way to assure that you’ll be able to get your next house, car, or even your next credit card, is to do everything you can to keep your credit score as high as possible. And, if your credit is already fair to poor, you’ll need to do everything you can to improve that score.

How can you improve your credit score?

  • Repay what you owe promptly. Nothing will ruin your credit score faster than failing to repay a debt.   Even a slow or missed payment can have a drastic affect on your score.
  • Know your credit score, and how it is calculated.   Factors such as your total debt load, how close your credit cards are to the credit limit, home ownership, and your employment history can all affect your score.
  • If your total debt load is too high, or your credit cards are all running at their limit, work to pay more than the minimum due each month to bring down your balances, and reduce your debt load.
  • Make sure that the information contained on your credit report is correct.  If your credit report contains outdated or false information, dispute the reports, or have them corrected to at least contain accurate up to date information.
  • Review your credit report regularly and seriously consider having a professional monitor your credit report.  The cost of having a professional monitor your credit report and protect your identity is minimal compared to the cost of correcting and recovering from identity theft.

Even if you’ve already been rejected for a loan, implementing the tips discussed here can and will improve your credit score, and the next time you need credit, the results could be very different!