The New Year is upon us – do you know what your New Year’s Resolution is yet?
Whether you have an idea or not, we’d like to make a suggestion: how about rebuilding credit as your resolution?
Many times people resolve to balance their budget, pay down credit cards, or get out of debt — all of these are valid goals and important to keep in mind.
But resolving to achieve a better credit rating can sometimes go overlooked — and it’s one of the most achievable resolutions with a long-lasting effect!
When you have a better credit rating, you’re eligible for more financing at lower interest rates. This can help improve everything from your mortgage rate, to your personal loan rates, to even your car insurance rates.
As an added bonus, when you resolve to rebuild your credit, often those other goals – balancing your budget, paying down credit cards, getting out of debt — all happen along the way.
Here’s what you need to do to make your rebuilding credit New Year’s Resolution a reality:
1. Get rid of past debts.
Past debts make it much harder – and sometimes even impossible — to rebuild credit meaningfully.
Even if you do all the credit rebuilding habits right, if you have unpaid past debts weighing down your credit report, it will be difficult to make much progress.
As a first step, look at how you can deal with those outstanding debts. You might consider debt consolidation, refinancing your mortgage, or filing for a consumer proposal or bankruptcy as options.
While filing for a consumer proposal or bankruptcy may hurt your credit score in the short-run, if it’s the only way to deal with outstanding debts, it may be worth it.
You can’t rebuild credit without first cleaning up what you owe.
2. Reduce expenses.
Once your past debts are cleaned up, the next step is making sure you don’t accrue more debt that isn’t absolutely necessary.
Look long and hard at your budget and where you spend your money. Determine what is a want and what is a need. And even for the needs, look for ways you could save. For instance, you may need to buy groceries, but do you need to buy the brand name products?
There may be certain expenses you simply can’t reduce any more – like your car payments. In that case, you might think about whether you truly need that expense. For example, if your car is becoming a money pit it might be more affordable to get rid of it and rely on public transportation or ride sharing.
This step can seem daunting at first, but it is necessary to creating a healthy credit score and a healthy financial future. And it’s not forever – as you start to save and rebuild, you will be able to allocate more budget to the “wants” in the long term but in order to get there, you need to prioritize your spending for the short term.
3. Rebuild your credit.
The third step to fixing your credit rating is to create new, positive credit.
To do this, you need to deploy a good strategy and practice healthy habits. For instance, if you use a credit card to rebuild credit, don’t max out your balance or make late payments.
There are many ways you can rebuild credit and the right one for you will depend on your situation – what your credit score currently is, whether you have filed for consumer proposal or bankruptcy, and so on.
You might consider a secured credit card or taking out a personal loan that reports to the Canadian credit bureaus. In either case, make sure you are practicing smart repayment habits.
Achieving a better credit rating is possible… especially with help from Prudent Financial Services. We offer solutions for rebuilding credit every step of the way — from dealing with debt, to reducing expenses, to financing to create new, positive credit.
Get started today and get a head start on your New Year’s Resolution. Call 1-888-852-7647 or visit www.prudentfinancial.net for a free consultation.