Last year was financially difficult for millions of Americans. Between pandemic shutdowns and the resulting economic fallout, many people lost their sense of financial security. And if you were unable to pay your bills on time or effectively manage your debt, your credit score may have taken a hit as well.
In this New Year, it’s a good idea to make some resolutions that can help you maintain a stronger credit score. Here are three credit resolutions to make starting now:
1. Save for an Emergency
Emergency savings funds can help you avoid emptying your bank account or racking up credit card debt when an unexpected financial issue arises. Whether you need cash to help get you through a period of unemployment or you have an unexpected expense like a car repair, having some cash set aside in savings can come in handy.
It’s commonly recommended that people set aside three to six months’ worth of expenses to weather financial storms, and that may not even have been enough last year. But if that sounds too impossible, remember that something is better than nothing.
Emergency savings funds can also help protect your credit. Having cash in times of emergency can help you avoid taking on too much debt or maxing out your credit card to afford emergency expenses, which can negatively affect your credit score.
Try to work some emergency savings into your monthly budget to be better prepared.
2. Maintain a Low Credit Utilization Ratio
Keeping your credit utilization ratio low can also help you protect your credit. Your credit utilization ratio is the amount of available credit you are currently using. If the ratio is too high it can negatively impact your credit score. It’s commonly recommended to keep your utilization, across all credit cards you own, below 30%.
High credit card balances can cause your credit score to dip and may be a warning sign for creditors and lenders that you’re overextended. Ideally, you should pay off your credit cards in full each month to avoid interest charges and maintain a 0% utilization ratio.
If that’s not possible, keep your utilization ratio as low as you can to help maintain your credit score.
3. Pay Attention to Your Credit
Paying attention to your credit report can help you manage it effectively and watch for signs of inaccuracies or fraud. When false information lands on y our credit report, it can be a symptom of identity theft.
Paying attention to your credit is crucial to protect it. If managing your credit report and credit score on your own seems too challenging, you can sign up for credit monitoring and identity protection to give you peace of mind and ensure that someone is looking out for you. Identity theft and credit monitoring services can watch your credit reports, provide you with the most current information and alert you whenever something changes.