improve your credit in 2022

The start of a new year signifies for many to do better. Often, after the holidays, people find they’re more in debt than they were before. That’s why resolving to create a strategy for your finances throughout the year and for the next holiday season will put you in a better place the following year.

It’s easy to suddenly find yourself in credit card debt. You may think you have it handled, but if you’re struggling to make even the minimum payment, you’re in trouble. Here are some tips to follow this new year:

Create a budget.

People get into credit card debt by spending more than they can afford. This racks up fast. To combat this, look at all your monthly expenses, including mortgage, rent, auto payments, insurance, utilities, phone, internet, cable, groceries, childcare, and transportation. Dining out, travel, memberships, and any other miscellaneous expenses that might come up should also be factored in. You can also free up additional cash by cutting expenses. Do you need that additional channel? Can you eliminate restaurant expenses? Can you choose a family activity that’s free? By freeing up money within your budget you’ll be able to pay off your credit cards faster and more efficiently.

Build your debt budget.

After drawing up your monthly budget, any additional money you have leftover should be put toward paying off credit cards. Different strategies can be used to pay off credit cards, such as the debt avalanche method, which works by paying toward the loan with the highest interest rate first. Another method, the debt snowball, works when you take any extra money left over after paying the minimum on your other debts and apply it to the smallest debt. Once that’s paid off, you can now apply the dollars you were paying on that one to the next smallest debt.

Work on your bad habits.

Changing your spending habits is critical to paying off debt. Using cash or a debit card for purchases is recommended, but if you do use a credit card, only do so for items you can repay promptly. If you’ve never been good about saving, now is the time to change that. Make sure you have a nest egg for when emergencies arise, for example, an unforeseen car repair. This way, you have options beyond putting it on the credit card and racking up more debt. Another habit to fix? Pay on time. When you miss one payment, you may be charged a late fee—and more over time as you pay more on interest. When a payment is more than 30 days late, your late payment may be reported to a credit bureau and can negatively impact your credit score. 

Need more help?

Sure signs that you’re in trouble with credit card debt include calls from creditors and cards getting declined. Experts agree that if anyone has more than $5,000 in debt, it’s time to get help. That’s what debt management plans are for. The benefits of enrolling in a debt management plan include a consolidated monthly payment that’s affordable, lower interest rates, and a payment plan designed to be paid off in three to five years. By pledging to get your finances in order in the new year, you’re setting yourself up for a more fulfilling year—one that is financially more secure.


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