New Goals for a New Year

This new year, many folks will likely take time to reflect on the last 12 months, reminiscing about important events such as weddings, holidays and family gatherings while taking time to enjoy leftovers and gifts with the family.

During this time, many will also likely contemplate their life goals and the means with which they can achieve it in the coming months. Whether this means resolving to invest more money in different resources, putting aside funds for a child’s college education or saving for a vacation or bills, nearly everyone has a short-term or long-term financial goal they can start making preparations for.

Regardless of what the goal is, many folks will likely want to take this time to get organized. This can mean, taking care of bills that have been piling, reviewing financial paperwork such as pay stubs and monthly bills and making sure they are collected and stored in a safe fashion.

Folks may also want to take the time to add year-end bonuses to savings accounts. They may even look to compare the rates on these accounts to those offered by other banks, as in recent months many lenders have added new fees and minimums to these products.

Credit Score Reflections

Likewise, many may also want to examine their credit score, a crucial three-digit number that lenders use to access a consumers’ qualifications for new credit cards, loans and insurance. The three major credit bureaus allow consumers to check their report once a year for free. In addition, the end of the year can be a good time to take advantage of this offer, as knowing a credit score can help you get ahead.

Nearly two-thirds of all Americans neglected to check their credit score in the last year. This means they could be suffering from a credit reporting error, an unpaid bill or another type of fiscal malady that could be draining money from their accounts.

Credit scores usually run between 300 and 850, with consumers who hold the higher numbers reaping added savings in the form of lower interest rates on home loans, credit cards and insurance premiums. Some of the major factors that make up this score are a credit history, credit utilization ratio and credit mix.

A consumer’s credit history typically shows a laundry list of monthly payments to banks and credit card companies, noting whether these payments were late or on time. Since lenders use this document to assess a consumer’s risk, by displaying trustworthiness and paying bills on time, folks can help increase the likelihood banks will lend to them at better rates.

A consumer’s credit utilization ratio is also important. This figure shows how much available credit a consumer has and compares it to the amount that is being used. Lenders typically like to see consumers using no more than 30 percent of their credit. This shows consumers are capable of borrowing and paying back their debt without letting themselves get sucked in to irresponsible spending.

Lenders also look at a consumer’s credit mix to help determine this score. This data shows the type of loans they currently have from different banks and lenders. For example, banks tend to favor those who are able to juggle different types of credit to those who use one type of debt exclusively, or more heavily than others.

By using various methods, consumers can demonstrate their ability to handle their finances and impress their current and future lenders. While it may not seem like the most relaxing thing to do after the holidays, getting the family’s finances in order can be a gift that keeps on giving and allows you to rest easy at night.

With the extra money that can be saved by managing a credit score, you can help ensure you have the funds to meet your short-term and long-term goals, no matter what they are.

Happy New Year!