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Top 5 Ways to Spring Clean Your Credit

Spring is meant to be a time of renewal and rejuvenation. For many people, this might include cleaning out the old attic or scrubbing the entire house from floor to ceiling. There's just something about a warm Spring day that should make us want to declutter life and move forward with a fresh start. But what about the financial clutter that has made it's way into our lives? Shouldn't it receive some attention too?

After all, April also boasts the title of Financial Literacy Month, which presents the perfect opportunity to reflect on our personal financial situations and identify ways to start organizing the clutter. Chances are credit will be on the top of your cleaning list as you begin this process.

So, if you've been neglecting your credit like those old dusty boxes of People magazines piled in the attic, harness the spirit of Springtime today and follow these five simple steps to Spring cleaning your credit:

1.) Take a Credit Inventory

How can you declutter what you don't know you have? First, make a list of your credit cards, lines of credit, and other installment loans. Next, find out what your credit limits are for all your credit cards and determine your overall credit utilization. You may be surprised at how much credit you've accumulated over the years, but don't be too anxious to close unused accounts. Available credit is a precious thing, and closing credit card accounts can even hurt your credit score.

2.) Organize Your Credit Files

Although organizing is a simple task for some, you should recognize that this step may require some quality time. Plan ahead by setting aside a Saturday afternoon to create organized folders for all of your important bills, tax documents, and other sensitive paperwork. But don't be a packrat! Part of getting organized is knowing what you do and don't need, so be sure to have a shredder handy to take care of all the paperwork you decide not to keep. If you're stashing more than you're shredding, something's wrong.

3.) Detox Your Credit Reports

You should think of your credit reports as a key indicator of your financial reputation. If there are any negative marks, whether correct or incorrect, ignoring them certainly doesn't make them go away. So, take the time now to pull all three of your credit reports and give them a good scrubbing. If you find errors or inaccuracies, submit your disputes to the credit bureaus for further investigation.

4.) Powerwash Your Debts Away

Now that you've organized what you have and you know what you owe, it's time to develop an aggressive strategy for becoming debt free. If you don't know what your debt is costing you on an annual basis, figure out the number. This is an important part of financial literacy because consumers often choose to ignore the total cost of a purchase including interest and fees. When you see how much your debt really costs, you will likely have all the motivation you need to face reality and cut down on debt.

5.) Simplify

Leonardo DaVinci once said, "Simplicity is the ultimate sophistication." Likewise, financial sophistication doesn't have to be all about complexity. In fact, you should take all possible measures to simplify your finances by making savings and payments automatic, requesting online statements, and consolidating accounts where necessary. If there's anything that will keep your credit situation decluttered in the future, it's simplicity.

on Wed, 2009-04-08 17:00