It’s finally time to ring in the New Year! You’ve probably made a few resolutions already—hit the gym, start up a new hobby or two, read at least 10 books. While those are all great resolutions, have you thought about your credit resolutions?
Maybe your credit score isn’t where you want it to be. Or maybe it’s doing just fine. Either way, your credit score could always use some work. Make 2020 the year you stay on top of your credit. If you’re grasping for credit resolutions ideas, don’t worry. We have some suggestions.
1. Pay Your Bills on Time
Sure, it sounds easy. But if you’ve got multiple credit cards or you make more purchases than you can keep up with, this might be easier said than done. You might dismiss the need to pay your bills on time—after all, you’ll only have to pay some interest, right?
It’s not that simple. First, interest can really add up over time. And if you have less-than-ideal credit, your interest rates will probably be higher than average. Secondly, your payment history—or the record of whether or not you’ve paid your bills on time—makes up a whopping 35% of your credit score.
Basically, if you don’t pay your bills on time, it’ll definitely reflect in your credit score. So do whatever you have to do to avoid late payments. Here are a few ideas:
- Keep a spreadsheet
- Set reminders on your phone
- Set up automated payments
- Schedule bill due dates on your calendar
2. Keep Your Credit Utilization Ratio at 30%
Ever heard of credit utilization ratio? It’s the ratio of how much credit you have available to how much you’re using. If you get too close to your credit limit for comfort, your credit score could take a hit. That’s why it’s safer to keep your credit utilization ratio at no more than 30%.
How does it work exactly? Here’s an example: Let’s say that you have three credit cards with $6,000, $5,000 and $3,000 credit lines. That means your revolving credit is $14,000. Since your credit utilization ratio should be no more than 30%, you can use $4,200 of your revolving credit.
Your credit utilization ratio makes up for 30% of your credit score, so don’t take this too lightly. And if you’re unsatisfied with your own credit utilization ratio, it might be time to get a credit card or two that’ll bump up your revolving credit.
3. Open a Few More Credit Accounts
When you apply for a job, you have a better chance of getting that job if you have a lot of experience on your resumé, right? The same thing applies to your credit report. But instead of jobs, you need credit accounts.
If you apply for a line of credit, lenders like to see that you can handle all types of credit accounts. Try to aim for opening a few revolving accounts, which are credit accounts that have different payments each month based on your current balance. Revolving accounts can include credit cards issued by banks or retail stores, home equity lines of credit (HELOCs), etc.
When you have a good variety of credit accounts, or a good credit mix, your credit score will also get a boost. After all, your credit mix makes up 10% of your credit score.
4. Check Your Credit Score Regularly
If you’re looking for an easy credit resolution that’ll take you a step in the right direction, this is it. You should already check your score regularly, but now’s the time to start if you haven’t.
Besides the obvious reason to check your credit—to make sure you’re where you need to be—checking your credit is pivotal before you apply for another line of credit. Every time you apply for a new credit card, loan, etc., the lender looks into your credit score.
This is important for two reasons. First, your credit score shows your eligibility for that new line of credit. So if you want that sparkly new credit card, you need to make sure that your credit is in good shape. Second, lenders tend to pull hard inquiries in your credit score when you apply. These tend to ding your score a bit.
Because of this, you want to keep your credit applications at a minimum, but you also want to make sure your credit is sturdy enough to get accepted andto withstand a hard inquiry. Try to play it safe—check your credit score as often as you can. You can sign up for our credit report card, which will show you your Experian credit score and grade your credit score based on the five main factors that play into your score.
Make 2020 The Year You Own Your Credit
If you’ve been waiting for a sign to start improving your credit, this is it. Make 2020 your year—for credit, finances and anything else you’ve been meaning to do. While we probably can’t help with all that other stuff, we’ve got the credit expertise you need to get where you want to go.