New year, new credit goals.
Although 2020 was, inarguably, the worst, it did have one small positive: It encouraged a lot of folks to reflect on what really matters. (I know that I, for one, have definitely spent some time reevaluating my own priorities.)
As we finally break free of 2020, it's time to set our 2021 goals -- both for life and for our finances. And no matter what you've found to be worth prioritizing, having a good credit score is likely to make your future a little easier. With that in mind, here are a few credit goals I've set for 2021.
1. Check all three credit reports
In the U.S., there are three main consumer credit bureaus: Equifax, Experian, and TransUnion. The credit bureaus keep credit reports on eligible consumers based on data they get from creditors and banks, and it's those reports that FICO and other agencies use to calculate your credit scores.
Each credit bureau is an independent company with its own data sources. Because of this, the information on your credit reports can vary from bureau to bureau, with some information -- or even entire accounts -- showing up on one or two reports, but not all.
Regularly checking your credit reports is the only way to ensure the information they contain is fair and accurate. Any mistakes or errors can be disputed and removed, and any signs of fraud can be investigated. But since you have a credit report with each credit bureau, you'll need to check all three of your credit reports individually.
In normal times, you're entitled to one free copy of your credit report from each bureau every year. Due to the pandemic, you can actually get free credit reports from each bureau every week through April 2021.
Unless you're actively making changes that could continuously impact your credit, such as rebuilding your credit score or fighting identity theft, you probably don't need to check your reports every week. However, you should check all three of your credit reports at least once a year to make sure everything is as it should be.
2. Set up automatic payments on every card
I'm loath to admit it, but this one is a very practice-what-I-preach situation. I often recommend automatic payments to help people avoid late fees, but I have one or two cards I just never got around to updating. Lo and behold, a busy November meant I forgot an irregular purchase on a rarely used card -- and I got a late fee for my mistake.
While I remembered to pay the card long before it became a potential credit score problem, an oversight like that could have gotten me into a lot of trouble. Payments more than 30 days late are considered delinquent, and delinquent cards get reported to the credit bureaus. Even one late payment on your credit report can do serious damage to your credit scores, and that damage can last years.
Rather than risk another completely avoidable fee -- or worse -- I need to make sure all of my credit cards are set up for autopay. You can set up automatic payments to cover just your minimum each month. Consider it like insurance; ideally, you'll remember to pay your card in full well before it's due, but if you forget, automatic payments will make sure you don't skip a payment entirely.
3. Plan out new credit applications carefully
With a pandemic still raging and the economy a mess, getting credit is probably going to be more difficult in 2021 than it has been in a while. Your current credit utilization (how much of your available credit you're using), account ages, and number of recent accounts are all likely to play bigger-than-usual roles in any new credit applications you submit.
In other words, if you're going to apply for new credit in 2021, you're going to need to be strategic. Unless your credit history is impeccable -- and even if it is -- a spate of credit card or loan applications will be a giant red flag for every risk-averse bank tightening its purse strings.
Even in a normal year, opening too many new accounts in a short period of time can be damaging to your credit score. In 2021, it could be automatically viewed as a sign that you're about to take on piles of debt you can't repay. My 2021 goal is to be stingy with new credit applications so I can qualify for those rare opportunities that are just too good to pass up.
Set your own goals for better credit in 2021
Your credit goals may not look like the list above -- and that's fine! You may be focused on paying down debt or reaching a specific credit score milestone. Your goals should be yours.
Whatever the case, be kind to yourself by setting realistic goals. Even small steps toward better credit can make a big difference throughout the year, and the thrill of completing one credit goal can help propel you toward the next one. Building credit is a marathon, not a sprint.
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