1. Shore Up Your Credit
The higher your credit scores, the better. Why? Because good credit can unlock a world of benefits, such as significant savings on big-ticket items (like car loans and mortgages), insurance discounts and access to credit cards with the best perks.
The first thing you should do to improve your scores is to see where they're at. Review all three credit reports maintained at each credit bureau: TransUnion, Equifax, and Experian (the publisher of this piece).
Get your free credit report from Experian, where you can also obtain your FICO® Score. You are entitled to one free credit report every 12 months from Experian, Equifax, and TransUnion at AnnualCreditReport.com. Review each credit report to make sure all the information is accurate. If you find mistakes or inaccurate information, initiate a dispute with the appropriate credit bureau.
Examining your credit report will also help you figure out what you need to do to improve your scores. Maybe you have a history of missed payments or you are using too much of your available credit each month. Your credit reports will help provide a roadmap for what to do next. And remember, the easiest thing you can do to improve your scores is to pay your bills on time.
2. Pay Down Your Debt
One of the best things you can do this year to fatten your wallet is whittle down your debt—especially high-interest credit card balances. Paying off debt quickly helps improve your financial health because you save money in interest, cut down on stress and improve your credit scores.
Start by making a list of all your credit card balances and loans with the monthly minimum payments and the APRs for each. Make sure you're making at least the minimum payments on each bill, and if you have extra money after you've paid your monthly fixed expenses, apply that extra amount to the debt with the highest interest rates first. Once you've paid off the debt at the highest rate, focus on the next highest rate, until you've knocked out all your debt.
If you need help paying off your debt, you may want to consider a debt consolidation loan, which involves taking out one new loan to pay off others. Such a loan can save you money by rolling your debts into one at a lower interest rate and minimizing the number of payments you have to make. Shop around for the best consolidation loan for you through Experian CreditMatch.
You can also transfer your current credit card balance to another card at a lower interest rate. Many balance transfer credit cards will offer an introductory rate, sometimes at 0%, for a certain period of time—giving you the opportunity to pay down the debt in that window without incurring any interest. Find the right balance transfer credit card here.
3. Beef Up Your Savings
Nearly half of all Americans surveyed by Experian in fall 2018 said saving money is a top New Year's resolution for 2019. Of course, saving money is easier said than done. That's why behavioral economists suggest automating your savings as much as possible so you don't even have a chance to touch the money you want to save.
If your employer allows it, direct a percentage of your paycheck to be deposited into a separate savings account. That way, the money you want to save never even appears in your checking account, tempting you to spend it. If that's not possible, set up a recurring transfer with your bank that transfers money into your savings account on the same day your paycheck is deposited.
4. Protect Your Identity
In a world where stories of data breaches and phishing scams fill the headlines, you must be vigilant about protecting your identity. In addition to monitoring your credit reports, run a free dark web scan to find out if information like your Social Security number, phone number or email addresses are on the dark web.
If you suspect you are a victim of identity theft, you might want to file a free initial security alert, which remains active on your account for one year, at the Experian fraud center. (You only need to file it with one credit bureau—they are legally required to share such alerts with their counterparts, so you don't need to file with all three.) This fraud alert will notify any lenders pulling your credit report to take extra steps to verify your identity—a measure that can frustrate and dissuade identity thieves.
You can also freeze your credit reports, which prevents lenders from issuing new credit in your name. Or try Experian CreditLock, a benefit of your Experian membership, which allows you to lock and unlock your report in real time with no waiting period. You also receive daily monitoring of your credit file, up to $1 million in identity theft insurance, and access to your Experian credit report and FICO® Score.
5. Make Your Credit Cards Work for You
Be sure you have the best credit cards in your wallet for your spending needs. If you tend to carry a balance, find the card with the lowest interest rate possible. If you don't carry a balance, a cash back card or rewards card can put money back in your wallet.
Check out Experian CreditMatch for personalized credit card offers that match your credit profile so you can apply for your next card with confidence.
December 19, 2018