Ahhhh the New Year is up on us! 2012 here we come! Now that your Christmas/Hanukkah/Kwanzaa/Winter Solstice gifts are unwrapped, the fruit cake from Aunt June is put away to age for the rest of eternity, you finally have a moment of clarity! Holy crap! I have credit card bills on their way. I have to pay for all of these merry festivities now!
Not to fret, we’re here to make some sense of it for you, and to give you some guidance so that you don’t go as crazy as “Cousin Eddie” standing in the snow with a septic hose in his hand.
Chapter 1. First Things First
You should obtain your free copy of your credit report after the New Year. Since you are allowed, by law, one free copy per year- what better time to get it than the start of a new year. Go to www.annualcreditreport.com to access your Experian, Equifax, and TransUnion credit reports. Review these reports very carefully, make note of any accounts or any details of the accounts that don’t seem accurate or even are not your accounts at all.
Chapter 2. Second
Take note of credit card utilization on your revolving lines of credit. Since you were likely hittn’ those credit cards like….well you know. Your credit card utilization ratios likely went close to 100%. Anytime your credit cards exceed 50% utilization, your credit score will take a serious dive. According to the FICO credit scoring model, credit card utilization accounts for 30% of your entire credit score.
Chapter 3. Third
Set some financial goals. Now that you have your free credit reports in hand, added with the fact that you are entering a new year, what better time to set some goals? What do you want to accomplish in 2012? Do you need to refinance you home? Buy a new car? Prepare a son or daughter for college or an up-coming wedding? You are likely going to need to use credit to accomplish any of these goals.
With your credit reports spread in front of you now, you can now see the “big picture”. You can now see what cards need to get paid down to achieve that 30% or less utilization ratio to help grow that FICO score. You will be able to take note of any accounts that have erroneous information so that you can begin disputing these inaccurate items with the credit bureaus.
Chapter 4. Finally
In order to have a successful, prosperous, and relatively stress-free 2012, you must start now to recognize areas of trouble and deal with these financial issues promptly.
Just think, you should want to have your financial life in order given the Mayan Prophecies anyway. You don’t want to be that guy whose sole financial survival plan is to post-date all his checks until December 22, 2012 do you? I knew you were smarter than that guy!
Good luck and have a happy and prosperous 2012.