The new year is right around the corner, which means for many, it’s time to start thinking about goals for the coming year. According to a study by Finder141.1 million American adults, about 55% of US adults, believe they will be able to keep their New Year’s resolutions.
Many Americans use the beginning of the year to adjust their lifestyles. Career advancement and health improvement are common goals shared by many. But you can use the start of the year to improve your finances, including your credit.
Start by getting a free copy of your credit report and FICO score to discover where you currently stand.
4 Ways to Improve Your Credit in 2023
Improving your credit is an excellent way to strengthen your financial profile and save money on loans and other forms of credit. Consider these tips and tricks to help youIn 2023.
- Check your credit to see where you stand
- Repair your credit
- Reduce your debt-to-income ratio
- Consider debt consolidation
Check your credit to see where you stand
The first step to improving your credit is to get a copy of your credit report to get a clear picture of your credit profile and identify areas for improvement. Experian and TransUnion are two major credit bureaus that generate credit reports based on your credit history. Since creditors and lenders do not always report to each bureau, your credit report may differ slightly from one bureau to another.
For a more complete view of your credit, it’s also wise to learn, which you can often find on your bank or card issuer’s site Each of the three major credit bureaus produces two types of credit scores—a FICO score and a VantageScore. Each scoring type uses a 300-850 point credit scoring scale but assigns levels differently. Generally, the higher your score, the better your credit.
You can get your credit score from any of the three credit bureaus for free by answering a few short questions.
Repair your credit
One of the fastest ways to improve your credit. Once you get your credit reports, review them carefully for errors or accounts you don’t recognize. If you discover incorrect information, file a dispute with the appropriate bureau. It’s also a good idea to report the problem to the appropriate lender or card issuer, who can forward the correct information to the bureau.
If you don’t want to do the legwork yourself, you can enlist a reputable credit repair service to do the work for you. Credit repair companies offer to help you repair your credit for a start-up fee of about $100 and a monthly fee thereafter. Some companies may send “Goodwill Intervention Letters” to your creditors. The purpose of this letter is to appeal to a creditor and request that a negative mark be removed because the error does not reflect your otherwise exemplary payment record.
Many credit repair companies are legitimate, but sadly, that is not always the case. Check the record of a credit repair service by searching the Consumer Financial Protection Bureau’s complaint database or by searching for the company on the Better Business Bureau (BBB) website.
Start improving your credit with Lexington Law Credit Repair now or use the table below to explore the top credit repair services.
Reduce your debt-to-income ratio
Reducing your debt balance on revolving credit accounts like credit cards is another way to positively impact your credit score. That’s because your credit utilization ratio is the second most important factor in your credit score, making up 30% of your FICO score.
Credit utilization ratio is the amount of available revolving credit that you are using. Credit experts recommend maintaining a credit utilization below 30% of your credit limit – the lower, the better.
Your debt-to-income ratio (DTI) is another important factor that lenders consider when deciding to approve your credit application. You use a percentage of your gross monthly income to pay monthly bills like rent, credit cards, student loans, and other debts. You generally need a DTI below 43% to qualify for a mortgage, but some lenders prefer a DTI ratio below 36%.
To reduce your DTI, review your account statements to identify expenses you can deduct, such as streaming services and gym memberships you no longer use. On the other side of the equation, look for opportunitiesLike volunteering for overtime or running around for hours.
Consider debt consolidation
Consolidating your debts is a common strategy to speed up your repayment schedule. Aor a Options to consider, though, may require you to have good credit to qualify.
Debt Consolidation Loans
A debt consolidation loan allows you to combine several high-interest credit cards into one loan, ideally with a lower interest rate. Instead of making multiple credit card payments, you’ll make one monthly payment until the loan is due.
According to the most recent data Federal Reserve, the average credit card interest rate is 18.43%, while the 24-month personal loan interest rate is significantly lower, averaging 10.16%. By paying lower interest charges, more of your payments will go toward your principal balance to pay off your loan faster.
Not sure if a debt consolidation loan is right for you? Get a free savings estimate from National Debt Relief now and find out.
Balance transfer credit card
With good credit, you can qualify for a balance transfer credit card with an introductory 0% annual percentage rate (APR) when you bring your balance from one or more credit cards.
Depending on the card, you can enjoy up to 21 months interest-free, saving you hundreds or even thousands of dollars. For example, a balance transfer card can make it easier to pay off your debt faster, with more of your money going directly toward your principal balance each month. Remember, balance transfer cards usually come with a fee, usually 3% or 5% of the balance transfer amount.
It usually takes time to improve your credit. Follow the steps above and practice good credit habits, such as keeping your credit utilization low and making consistent timely payments on your credit accounts. Remember, your payment history makes up 35% of your FICO credit score.
Finally, apply for credit only when you need it because you shouldn’t be paying interest on money you don’t need.