3 Ways to Clean Up Your Credit This Spring

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Finding a few minutes for these tasks could pay off big time. Read on to find out how. 

Pretty much everyone has closets and drawers that could really use some cleaning up this time of year, but you may not feel like you have a lot of incentive to do this. If you’re going to devote a lot of time and energy to a project, you want to reap some real rewards at the end of it, right?

In that case, you might consider setting your sights on a new spring cleaning task: fixing up your credit. Here are three steps you can take to get started.

1. Check your credit reports

Checking your credit reports is a simple way to identify factors that, rightly or wrongly, are bringing your credit score down. It only takes a few minutes to do and it won’t cost you a thing.

The government requires all three credit bureaus — Equifax, Experian, and TransUnion — to provide free annual credit reports to all Americans who request them. And until the end of 2023, you can actually get free weekly credit reports. This can help you track your progress if you’re working toward improving your credit.

To view yours, visit AnnualCreditReport.com and request them. You’ll have to answer a series of identity verification questions first and then you’ll be able to view and save your reports.

Make sure everything that’s in the report appears accurate, including your contact information and your account details. If you notice a mistake, like a closed loan account still showing as open or an account you don’t recognize, contact the credit bureau and the financial institution associated with the account immediately. The credit bureau will conduct an investigation and will update your report if appropriate. This is a simple way to catch identity thieves before they wreak too much havoc on your finances.

2. Come up with a plan to pay off any credit card debt

Credit card debt can affect your ability to save for your long-term goals, and too much of it can weigh down your credit score. So if you haven’t already done so, now is a great time to plan how you’ll get rid of yours.

The first step is to take stock of where you’re at. Make note of each card you’re carrying a balance on, along with its interest rate, balance, payment due date, and minimum payment. Then, decide how you want to prioritize them.

One of the most common strategies is the debt avalanche method. This is where you make the minimum payment on each card every month to avoid late fees. Then, you put all your extra cash toward the card with the highest interest rate first until it’s paid off. Then, you move onto the card with the next-highest interest rate, and so on, until you’re debt free.

You could also try applying for a balance transfer credit card or a personal loan. A balance transfer card allows you to pay down your principal for a set amount of time (usually between 6 and 18 months) without accumulating interest. However, there are one-time fees associated with balance transfers. A personal loan could be a wise choice if you want a predictable monthly payment, but interest rates on these can be fairly high too, especially for those with poor credit.

3. Decide whether to get rid of any of your old credit cards

Getting rid of your old credit cards generally isn’t a wise move for your credit for two reasons. First, it raises your credit utilization ratio. This is the ratio between how much credit you use each month and how much you have available to you. Generally, you want to keep yours under 30% to keep your credit score high. But closing a credit card reduces your available credit, which will in turn raise your credit utilization ratio.

Second, if you’ve had the card for a long time, closing it could reduce your average account age. This could also hurt your credit score. But sometimes, it makes sense to close a credit account anyway.

If you’re no longer using the card and it charges an annual fee, getting rid of it could take one bill off your plate. One fewer credit account could also make it easier to manage your finances and monitor your cards for signs of identity theft.

If you decide to close a card, choose just one for now and avoid closing another for at least six months afterward. This will minimize the effect it has on your credit score.

Some of these tasks might not be particularly exciting, but the payoff can be pretty big. If you’re able to raise your credit score over time, you can look forward to better interest rates on loans, more lucrative rewards credit cards, and more.

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