In 2013, make a resolution to improve your credit

March 28, 2013 (Press-News.org) In 2013, make a resolution to improve your credit

Article provided by Wyatt & Gracey, PC
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For many people, the holiday season comes with a significant increase in spending. Between gifts, travel and the special groceries for holiday dinners, most people end up spending more than they otherwise would in a given month.

If these expenses were put on a credit card, though, holiday spending may end up being a gift that keeps on giving -- in a bad way. Unmanageable debt can have all sorts of negative consequences, and going over your credit limit or missing payments will do lasting damage to your credit score.

If your credit score has taken a hit in 2012, why not make a resolution to start fresh in 2013? Here are some tips that can help you get started:
-Get your credit report: The first step to improving your credit is to take stock of your situation. Request copies of your credit report from the three major credit bureaus -- Experian, Equifax and TransUnion -- each of which are required by law to provide one free copy each year. Check to see if there are any errors or fraudulent activities on the reports and, if so, contact the credit bureaus to have those corrected.

-Understand your credit cards: Take time to read the terms and conditions of your credit card contracts -- you may be surprised at what you learn. The terms and conditions will document all of the different ways you could be charged fees or subjected to interest rate hikes. Understanding these pitfalls will help you avoid them in the future.

In addition, take time to review your credit card statements carefully. Pay special attention to times when you have been charged late fees or other penalties, and try to learn from those mistakes.
-Pay down your debt: Make a budget, and prioritize paying off your credit card debt. If you can't afford to pay off the entire balance, that's OK -- even small reductions in principal can have significant benefits in terms of improving your credit and reducing interest charges. If you have more than one card, start by focusing on the card with the highest interest rate. Always make more than the minimum payment, even if you can only afford to exceed it by $5 or $10 a month.

-Think before you cancel: If you're trying to reduce your debt, canceling your credit cards may seem like a good idea. However, it can actually do more harm than good. Credit scores incorporate something called a "credit utilization ratio," which is a comparison of credit available to debt incurred. Closing out all of your available credit may actually cause your score to drop.

-Build new habits: While paying off your debt will help your credit score improve, you can't just avoid credit altogether once your balances are gone. To keep improving your credit score, consider charging a few small expenses each month and paying off each bill in full. If you do have to carry debt forward, be sure to keep your balance below 35 percent of your available credit.

By following these tips, you can help yourself get back on track with your credit in 2013. However, if your debt has grown to the point where it is unmanageable, you may want to consider filing for bankruptcy. A Chapter 7 or Chapter 13 bankruptcy will discharge most credit card debt to provide you with a new fresh start.

If you are concerned about your debt load, consider making an appointment to talk with an experienced bankruptcy attorney. The attorney will be able to assess your situation and help you figure out the best path for moving forward.