Spring Clean Your Credit in 5 Easy Steps
Spring is a time of renewal and rejuvenation. For many, there's just something about the spring season that makes us want to declutter life and move forward with a fresh start. This might include scrubbing the entire house from floor to ceiling or finally getting around to cleaning out piles of junk from the old attic.
But what about all the financial clutter that makes its way into our lives? Shouldn't it get some attention too?After all, April also boasts the title of Financial Literacy Month, which presents us with the perfect opportunity to reflect on our personal financial situations and identify ways to start organizing all the clutter that has built up over the past year. As you begin this process, there's a good chance your credit will be on top of the cleaning list.
So if you've been neglecting your credit like those old dusty boxes of magazines piled high in the attic, harness the spring spirit today and follow our five easy 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 cards and determine your overall credit utilization ratio. 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 scores.
2.) Organize Your Credit Files
Although organizing is a simple task for some, you should recognize that this step might require some quality time. Plan ahead by setting aside a rainy Saturday morning 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 that isn't worth keeping around. 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 personal financial reputation. If there are any negative marks, whether correct or incorrect, ignoring them won'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.) Power Wash Your Debts
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 in unnecessary interest charges, you'll likely have all the motivation you need to face reality and cut down on your debt fast.
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 personal finances by making savings and payments automatic, requesting online statements, and consolidating accounts whenever possible. If there's anything that will keep your credit situation decluttered in the years to come, it's simplicity. Photo by SoekFoto