Being a new parent can be overwhelming and filled with joyous newfound experiences. Amidst all the changes that come with welcoming a child, one aspect of life that can all too easily be forgotten is credit score maintenance. However, taking small steps now to ensure a good credit score can go a long way. Here are five steps new parents can consider to keep their credit score in good health.
1) Establish A Financial Safety Net
Having A Plan for Emergencies
Having a plan in place for emergencies is a critical step in establishing a financial safety net. Having the ability to cover expenses when unforeseen costs arise can be the difference between stability and disaster. Here are a few things to consider when creating your contingency plan:
- Create an emergency fund: An emergency fund can be a lifesaver, especially when faced with an unexpected expense. Start by setting aside a small amount each month, allowing it to grow into a larger sum over time.
- Explore insurance options: Having the right coverage can cushion the blow should you experience a major financial setback. Make sure to review and update your policy annually to ensure it is up to date.
- Look for financial assistance programs: It may be possible to receive assistance from local or state agencies, such as through grants or subsidized loans. Research what is available in your area.
Being Prepared for Anything
A financial safety net is about being prepared for anything. Make sure to stay organized and review your budget on a regular basis. This will help you stay ahead of any potential issues and make sure you are aware of any looming costs that may need to be addressed. Additionally, having a reliable financial adviser or partner you can turn to for support can be invaluable in stressful times. Make sure to create a team you can lean on for advice, guidance, and assistance in financial matters.
2) Guard Your Credit Utilization
Manage Your Credit Ratio.
Credit utilization, often referred to as the debt-to-limit ratio, is a crucial factor in determining your credit score. It’s calculated by dividing the total amount of revolving debt you owe by the total amount of credit you have available. Keeping your ratio low is important; 30 percent or lower is the generally recommended cap.
Here are some ways to achieve this:
- Pay your balance down to as close to zero as possible each month.
- If necessary, request a higher credit limit (and make sure you don’t go overboard with it).
- Divide up charges to multiple credit cards.
- If you’re using more than one card, spread out the charge amounts.
By keeping an eye on your credit utilization and paying down your due amount each month, you can improve your overall credit score over time. You may also get better credit cards and be able to qualify for loans with lower interest rates.
3) Monitor Your Credit Report Frequently
Keeping an eye on your credit report is key to maintaining a good credit score. It’s recommended that you check it periodically throughout the year to make sure there are no errors or fraudulent activity. Here are a few reasons why this is so important:
- Be aware of any errors or fraudulent activity that could result in a poor credit score
- Spotting errors and suspicious activity quickly will allow you to take proactive steps to correct the issue
- Protects from identity theft
- Monitoring your credit is a good way to stay informed about your financial health
A lot of people are unaware that they can check their credit report for free on a periodic basis. However, you can take advantage of this opportunity by signing up for an account with one of the major credit bureaus. You’ll be able to access your credit report for free and monitor any changes or activity that could affect your credit score. Plus, you can keep track of any new activity occurring with creditors or lenders that you don’t recognize. It’s a great way to stay on top of your financial health.
4) Manage Debt Payments Responsibly
Debt may seem like a daunting and unmanageable task, but with a few sound strategies, you can manage debt payments responsibly and get back on track financially. Here are some helpful tips to get started:
- Track your debt: Start by knowing how much debt you have and where it’s coming from. List each lender, the outstanding balance with that lender, and the monthly payment due. In understanding the magnitude of your debt, you can take the necessary steps to manage it.
- Set repayment goals: Create short-term goals. Decide when you will pay off each of your debts and create a timeline to follow as you make consistent payments. This sense of control empowers you to move towards a debt-free life.
Persistence and discipline are foundational to debt management. Make a plan and stick to it. Prepaid debit cards, for instance, allow you to manage your debt payments responsibly. You can load all your regular incoming funds onto the card, making it easier to keep track of your budget and payments, without the fear of overspending.
Congratulations on your new bundle of joy! As you embark on this exciting journey into parenthood, you’ll want to make sure you take the necessary steps to protect your credit score. Developing positive money habits now can help you provide a secure financial foundation for your children’s future. Keeping an eye on your credit score is one of the key pieces to this puzzle. Now that you’ve learned about the five steps new parents can implement to build and protect their credit scores, you can ensure your family’s financial success for many years to come.