Overspending and holiday debt happen, with a credit score drop typically occurring right after. While it may take time and effort, repairing your credit score is crucial for maintaining your financial health and securing future loans and other financial products. Here are a few tips to help you improve your credit score after falling into debt over the holiday season.
Immediate Steps to Take to Tackle Holiday Overspending
Here are some quick steps to take if you’ve overspent this holiday season:
Check Your Credit Report for Inaccuracies
Review your credit report and identify any errors or inaccuracies. Your credit report is a detailed record of your credit history, which lenders use to determine your creditworthiness. Reviewing your credit report can identify any errors or inaccuracies that may negatively affect your credit score. If you find any mistakes, you should contact the credit reporting agency to have them corrected.
US Consumers are entitled to a free copy of their credit report from each of the three major credit bureaus: Experian, Equifax, and TransUnion. You can request instant access to your credit report at AnnualCreditReport.com. You can also order your credit report by phone by calling (877) 322-8228. Your free report will be processed and mailed to you within 15 days.
Gameplan Based on Your Findings
Create a plan to pay off your debt. Once you’ve reviewed your credit report and identified any errors, it’s time to create a plan to pay off your debt. Start by listing your debts and their interest rates and prioritize paying off the ones with the highest interest rates first. This will help you save money on interest and make it easier to pay off your debts in the long run.
And if you need some help game planning your finances, check out BestCards’ handy Credit Card Payoff Calculator. This helpful tool can help you simulate your payments and provide a repayment strategy to help tackle your debt:
Related Article: Paying Off Debt – Debt Avalanche vs. Debt Snowball
Consolidate if Possible
Consider consolidating your debt. If you have a lot of debt and are struggling to make monthly payments, you may want to consider consolidating your debt. Debt consolidation involves taking out a single loan to pay off multiple debts, making it easier to manage your payments and save money on interest.
One of the easiest ways to consolidate debts is by opening a new credit card account –a new balance transfer credit card. The main reason to apply for a balance transfer card is that it can make paying off your debt a little easier. This approach to debt management may also help you save money in the long run and reduce your risk of defaulting.
Related Article: The Best Balance Transfer Credit Cards
Ensure You Always Pay On-Time
Make your payments on time. Paying on time can improve your credit score and demonstrate to lenders that you are a responsible borrower. One of the most significant factors that affect your credit score is your payment history.
Curb Your Credit Usage
While using credit responsibly is essential, it’s also important to limit your usage. Credit utilization, how credit use is measured, is one of the biggest impactors on your credit score. Your credit utilization – or the amount of available credit you use – accounts for 30% of a person’s FICO Score and 23% of what makes up a VantageScore.
Lowering credit utilization means avoiding applying for new credit cards unless necessary and only using your credit cards for purchases you can afford to fully pay off each month. By limiting your use of credit, you can avoid falling into debt again and improve your credit score over time.
Summing It Up
Repairing your credit score after falling into debt over the holiday season may take time and effort. Still, it’s worth it in the long run. By following the tips outlined above, you can start taking steps to improve your credit score and get back on track with your finances.
Related Article: Rising APRs Require Credit Card Debt Strategies
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