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Ways to Revive Your Credit Score in the New Year

The start of a new year is a great time to build your credit. When the clock strikes midnight on New Year’s Day, think of it as a fresh start — a time to change your financial health for the better. In fact, building good credit could be the best New Year’s Resolution you’ll ever make.

Why You Need to Build Good Credit

The new year will give you a fresh perspective on your finances. Think of your goals for the next 12 months — and how a good credit score will help you achieve them. Perhaps you want to purchase a new car. Or a new home. Maybe you plan to have a baby. Or send your child to college. These life events can be costly, and good credit can make it easier for you to gain access to the funds you need.

Check Your Credit Score for Free

The first step in making any improvement is knowing where you stand. Start by checking your financial history at AnnualCreditReport.com. This government-approved website provides you with a free copy of your credit report every 12 months from the three main credit reference agencies: Experian, Equifax, and TransUnion. Alternatively, use a site like Credit Karma.

Another simple way to know your credit score is reviewing your credit card statement. Many of the major credit providers include your credit score on your monthly statement. If you are unsure, you can contact them, as they most likely have the information available to share with you.

While too many credit inquiries can be potentially harmful to your credit, you’re own personal credit checks do not impact your score.  What’s most important is to stay informed about your status.

Create a Financial Plan

Write down key milestones for the coming year and figure out ways to build better credit by those dates. If you plan to marry your partner in the fall, for example, you might want to pay down an old credit card by the time you walk down the aisle. Remember, though, that paying down debt is more important than paying off debt because having a regular payment history shows that you use your credit responsibly. So, don’t shy away from using your credit card– just make sure the balance doesn’t get out of hand.

Avoid Becoming a Risk

The same way making too many credit inquiries have a negative impact on your score, applying for several financial products in a short space of time can also make you seem like a risk to lenders. As a result, you might find it harder to get credit. Instead, compare various credit card or loan providers and choose one that will likely approve you based on your financial history and personal circumstances. If you make repayments on time, you will build a good credit score.

Don’t Exceed More Than 30% of Your Credit Limit

Getting too close to the spending limit on your credit card can have a negative impact on your credit score. One easy way to avoid this is to see if you qualify for a higher limit on a card you already have. Another tactic is to organize your spending between more than one credit card, especially if you share household expenses on the same card as your spouse, parents, or children.

Demonstrate Responsibility Through Payment History

The best thing you can do for your credit score is to make payments on time, every time. Missing a payment or being late on a payment even once can have a big effect on your score because lenders may interpret it as a lack of responsibility on your part. The biggest thing lenders want to see is that they can trust you to pay them back on time– it’s as simple as that.

Pay Down Debts

If you are still paying credit cards and loans from years ago, it might be a good idea to pay off these debts. If you have the finances to do so, you can reduce the total amount of money you owe, which will improve your credit score. Make a list of all your accounts and find out how much interest you are paying on each debt. Contact your lender and see if you can pay off your debt early at a discount. Also, try not to apply for more credit if you can’t afford it. If you fail to make repayments, you could damage your credit in the long run.

Improve Your Financial Health in the Long Term

The tips above might build good credit in the short term, but making long-term changes to your financial behavior will make you more attractive to lenders. In the long term, pay all of your credit commitments on time — rent payments, loan repayments, credit card repayments, etc. You can even set up payment notifications on your phone to remind you to pay your bills on the day they are due

Want to boost your financial health in the new year? Follow the steps on this list and you could significantly improve your credit score. As a result, you could benefit from lower interest rates and a wider choice of financial products.

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