It's always wise to review your household financial strategy from time to time to see if there are any areas where you can not only reduce your ongoing expenses but ultimately improve your credit score. And we all know how credit scores are now tied to all kinds of things - from the interest rate on personal loans to your insurance premiums.
Here are six suggestions that can make handling household finances easier right now.
1. Know the "score."
Everyone has the right to a free credit report annually. Some banks do provide clients with a free credit report, but you can also obtain one online. Review each trade line on the report for accuracy. Look for any negative listings. Investigate any collections, late pays, or unfamiliar items. Dispute or explain any erroneous reporting by writing to the credit bureau. And make sure you keep copies.
2. Review important bank and monthly statements
Check statements for errors, including unnecessary bank fees. Do so regularly and do it soon. The more time that passes, the harder it is to rectify an error. At a certain point, research may have a cost, or information may no longer be available. Some providers will not waive fees for errors found after 60 or 90 days.
3. Enroll in a bank's automatic online payment service or use a third party service
Making timely payments is important in maintaining a good credit score. Technology now makes paying bills online efficient. The majority of banks and third party providers will make those payments at no charge, and most bill payment platforms integrate into financial software, such as Quicken or Mint.com. Securely enroll utility, car and mortgage payments online now.
4. Swap retail cards for one debit card
Most retail credit cards carry very high rates of interest and can only be used at the corresponding store. And carrying a credit card balance with high interest is a waste of money. While it can be difficult to go "cold turkey" by cutting up every credit card, start by replacing minor gas and retail cards with one debit card. Keep in mind that retail credit cards are not useful in a financial emergency either.
5. Account for your past year's monthly mortgage payments
Compare the interest paid on your mortgage for the previous year to the amount the lender reports on tax form 1098. As a loan amortizes, the interest paid per year should decrease in comparison to the amount going towards principal. Use an online amortization calculator to doublecheck what the bank reports and what you have actually paid. Also every year, your 1098 should state the amount of principal left on your mortgage. If not, contact the lender immediately. If there is no response, contact the state agency that regulates mortgage lenders.
6. Reduce unnecessary expenses
Review monthly expenses and determine what changes can be made. Cable and cell phone plans are a good place to start. View favorite shows without cost on a network website. Instead of buying books or movies, borrow them from the local library. Many libraries now even have free online lending. Cancel magazine subscriptions and read the library's periodicals. Reconsider gym dues and sell unused home gym equipment. Even YouTube has free exercise videos. Many communities also offer exercise programs at no cost. So become physically fit while getting fiscally fit.
Implementing some of these suggestions may take discipline. They will, however, be worth the effort when you see the savings.