Ah, springtime. Longer days, warmer temperatures. It’s the time of year when your thoughts may run toward cleaning out the garage. It’s also a wonderful time to tidy up your credit.
Here’s how:
- Pull your credit reports. There are three credit bureaus and each one is independently keeping tabs on your use of credit and debt. If you have any loans or use credit cards, you have a report at each of these bureaus. You can download them for free at www.annualcreditreport.com.
- Check for accuracy. Read your reports and look for anything that doesn’t seem right. Make sure they list your name and address correctly. See if there are any accounts you don’t recognize. Then look for what they say about your credit behavior. Of the five factors that impact your credit score, paying your bills on time counts for the most (35%). So, look for any indications of late payments. The bureaus use different language to convey that you have paid on time—from “current on payments” to “paid on time” to a rating of “OK.”
- Clean up any mistakes. If you see an account you don’t recognize, a late payment that you believe is in error, or any other information that is incorrect, your first course of action is to contact the credit bureau. Their phone number is in the report.
- Find out your credit score. One very important item that will be missing from your reports is your credit score. For that, see if your bank, credit union, or credit card issuer will provide it to you. If not, you can get it from FICO, the originator of the credit score.
- Make sure to pay bills on time. As noted above, it’s important to pay your bills by their due date. So, set up a system to make sure you do that. Find out the due date for your credit card and loan payments. Then put a reminder in your calendar to make these payments at least several days before they are due. The credit cards and lenders probably also have alerts you can set up. Some redundancy can be helpful.
- Pay off debt. Credit cards usually charge a very high interest rate on a balance that you carry from month to month. Not only does that cost you a lot of money, but it also makes it hard to get out of debt since so much of your monthly payment is going to interest. If you carry a credit card balance, a proven way to pay it off is to stop using the card (at least until you pay off the full balance) and commit to paying more than the minimum required monthly payment. Even adding a little to the required amount will speed up the process of getting out of debt.
- Follow the three “rules of the road” for wise credit card use. 1) Only use a credit card for pre-planned budgeted items (i.e., if your budget allows for $50 of spending on clothing each month, you can charge $50 of clothing each month); 2) Track your credit card use. If you use an online budget tool, it will do this for you. The important point is that this month’s use of a credit card counts against this month’s budgeted amounts, even though you won’t pay the bill right away; 3) Always pay your balance in full each month. If you’re struggling with whether or not you should get a credit card, click here to assist with your decision.
- Manage your credit utilization. This is another of the five main factors that impact your credit score. It has to do with how much of your available credit you are using. The ideal is to use no more than 30%. Even better if you use less than 10%. For example, if you have a credit card with a $10,000 limit and you have $3,000 of outstanding charges, you’re using 30% of your available credit. Once a month, the credit bureaus look at this, both on an individual credit card level and across all of your cards.
- Add an authorized user. If you have a child who is 16 to 20 years old, consider adding them as an authorized user on one of your credit cards. Since people younger than 21 generally can’t get a credit card in their own name, making your child an authorized user will help them establish a credit report and score. That will be helpful when they eventually want to rent an apartment and apply for a full-time job. Just be sure that the credit card you use reports information about the card to the credit bureaus under your child’s Social Security number.
- Review your credit card benefits. Most credit cards allow you to accumulate points that can be used for travel or entertainment. Many often come with extra benefits—everything from extended warranties on items purchased with the card, rental car insurance, discounts from various partner companies, and more. Go to your card’s website to review the benefits. And speaking of card benefits, with CCCU’s Cash Rewards Visa®, you earn 1.5% cash back while giving to Christian causes. Click here to learn more about this unique credit card option.
Access to credit is a wonderful privilege. Doing a little credit-related spring cleaning will help you maintain access to this privilege and maximize its benefits. Enhance your devotion to biblical stewardship with a Christian banking institution. Join CCCU today!
