January 1st, 2014
Top Ten Tips for 2014
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At Credit Karma, we’re not financial advisors, but we do know a lot about credit scores. In fact, if you’ve liked our Facebook Page you’ll see that we even created a weekly series devoted to sharing our knowledge, lovingly called “Tuesday Tips.” But these tips aren’t just to satisfy our affection for alliteration—they’re also to help our members get their finances in tip-top shape.
1. Monitor your account balances and transactions
Tracking your expenses can help you make better purchasing decisions, know how much money you have at any given point in time and identify areas in which you didn’t realize you’re overspending.
In addition, as demonstrated recently, even if you’re super cautious and diligent in safeguarding your personal information, sometimes companies who you have given your information to can get hacked. But don’t despair— regularly observing your account balances and transactions can keep you informed and help stop major catastrophes from happening. Don’t wait until identity theft has already happened—by taking preemptive action now, you may be able to prevent financial disasters in the future.
2. Keep your credit utilization between 1 and 20%
If you regularly max out your credit cards, it tells lenders you’re desperate for credit and are less likely to pay your debts back. This can negatively affect your score, so try to keep your credit card utilization rate between 1 and 20%.
3. Start using your old card again
Did you know that if your card is inactive for a long time, the credit card company may stop reporting it to the credit bureaus? This could negatively affect your credit utilization rate, so even though your very first credit card probably has an unreasonably high APR and no reward incentives, try keeping one small, monthly, recurring payment on it (and paying it off every month, of course) to keep it active.
4. Review your credit reports for errors
As credit scores are calculated based off of information from your credit report, errors on your reports could be hurting you. If you haven’t done this yet, pull your credit reports and dispute any errors to ensure your credit score accurately represents your creditworthiness.
5. Synchronize credit card payment due dates
If you’re having trouble juggling multiple credit cards and it’s negatively affecting your super-important on-time payment history, try calling your provider. They may be willing to change your monthly due date so you can synchronize your cards and minimize your chance of forgetting to make a payment.
6. Pay more than the minimum on your credit card
Paying off more than the minimum (or even better, paying in full) can save you thousands of dollars in interest and also save you a lot of future stress and headaches. As a hypothetical example, if you had a $2,000 current balance on a credit card with 15% APR today and only paid $40 every month, it would take over 6.5 years to pay it off and could cost you an additional $1,158 in interest (based on prevailing rates). So the next time you’re tempted to pay the lowest amount possible, consider your interest rate and rethink what you pay monthly.
7. Diversify your portfolio
If you’re doing all you can to improve your credit health, your score just isn’t changing, and you’re looking to open up a new account, try diversifying your portfolio by applying for loans other than credit cards. Some lenders like to see that you can manage different types of credit and handle multiple accounts at once, so having a good mix of accounts could help you out.
If you’re already saving for emergencies and retirement, great job! Keep up the good work, and if possible, save even more this year. If you don’t have anything saved up, now’s the perfect time to develop a new habit.
To force yourself to save, when you receive a paycheck, pay yourself first. This involves taking a set amount of money or percentage of your income and putting it directly into a savings account to use only in emergencies. Soon, you’ll adjust your budget to live on the slightly smaller amount of money while building up a nice emergency cushion and/or retirement account. Trust me, your future self will thank you.
9. Create a plan to pay down your debt
Debt is never fun, which is why we’ve written extensively about the topic. However, there are a plethora of tools that want to help you hack away at your debt. Check out, for example, ReadyForZero, which will give you a tailored plan to prioritize your debt and help you plan your payments. Or, check out our Advice and Learning Center to turn to the Credit Karma community for advice—you’re never alone in your debt journey.
10. Monitor your score
You didn’t think we’d get through an entire list of tips for improving your credit health without mentioning monitoring your credit, did you? We can’t emphasize the importance of monitoring your credit score enough. Our team hears countless stories of how Credit Karma informed users of fraudulent activity and allowed them to take action before much harm was done each year.
Bottom Line: These tips are by no means all-inclusive; however, this should give you a good starting point to get your finances on track for 2014. Good luck!
Jenna Lee is Credit Karma‘s Social Media Manager. Although her specialty lies in creating witty post-it notes, she also enjoys sharing all the financial information she’s learned since joining Credit Karma in February 2012. When she’s not working, you can probably find her trying out a new dessert recipe or learning/perfecting any musical instrument she can get her hands on. She may or may not have created a Twitter specifically to put in this byline. Say “hi” @leejennaa!
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