Credit Sesame’s 7-point list of credit management resolutions to consider for 2024.
The New Year is commonly associated with hope. It’s a fresh start and a time to set goals for the year ahead. The idea is that this year can be better than the last. That’s all well and good, but a brighter 2024 will not happen by itself. The key to making 2024 better financially than 2023 is to figure out what to do differently.
Credit management resolutions for 2024
At the end of 2023, here are seven personal finance and consumer credit resolutions for 2024 that may help make this year a better year for you.
1. Take control of your credit score
2024 is shaping up as a year when bad credit will be very costly. Lenders are tightening their standards in response to rising risk. That means credit will be harder to get, loan sizes and credit limits will be smaller, and riskier borrowers will be charged much higher interest rates. A lot of people will wish they had better credit. If you want to make it happen, you have to make the right moves. Start by getting your free credit score, and then consider signing up for credit monitoring so you can keep track of developments. Then, take steps to reduce your credit utilization and keep your payments on time. Some of the resolutions that follow may help.
2. Pay down debt
Americans set a new record for consumer debt in 2023. If your debt level reached a new high last year, it threatens your credit score in two ways. High balances raise your debt utilization ratio, a negative factor in calculating credit scores. Also, large balances at today’s high interest rates make payments harder to keep up with. A debt reduction strategy is the key to turning this around in 2024.
3. Reset your budget for today’s prices
High inflation is a major reason why debt levels have gotten so high. Surprised by rapid price increases, consumers reached for their credit cards to fill the gap. That’s an understandable short-term reaction, but it isn’t sustainable in the long run. Fortunately, inflation has slowed entering 2024. However, that doesn’t mean prices will return to their former levels. Update your budget for today’s prices and figure out what you can afford to buy without relying on continued borrowing.
4. Prioritize your debt payments
While you should be sure to make all your scheduled payments on time, ideally, put extra money towards attacking your high-interest debt first. With interest rates having changed so much over the past couple of years, you should take a fresh look at what you’re paying on each of your credit cards. Rank them from highest to lowest interest rates, and put any extra payments towards the one with the highest interest rate first.
5. Refinance high-interest debt
Looking at your credit card interest rates can also help you identify refinancing opportunities. If you have too much credit card debt to pay off within a few months, consider refinancing it. The average interest rate on an unsecured personal loan is about 10% lower than the average charged on credit card balances. A 0% interest balance transfer card can also be a good tool for refinancing. If you refinance, you should do it as part of a broader strategy to rein in spending. Otherwise, you may build your balances back up in addition to the debt you’ve refinanced.
6. Start saving for a larger home down payment
2023 was a rough year for would-be home buyers. Mortgage rates reached their highest level in decades, and home prices rose steadily. Don’t hold your breath waiting for either of those things to get much better. Today’s mortgage rates are actually much closer to their historical norm than those of the past 20 years. A chronic shortage of properties for sale may keep prices high. Instead of waiting passively for a better opportunity, saving up for a larger down payment is the best way to use your time. That will leave you less dependent on mortgage rates and help make the payments on your loan more affordable.
7. Get your retirement fund on track
When inflation demands more than your paycheck, retirement savings are often one of the first things to suffer. People cut their retirement plan contributions, and some even go to the extreme of tapping their retirement savings early. While these may be necessary emergency measures, you must reverse them so your financial future won’t be jeopardized. Besides getting your savings back up, high inflation means you should recheck your retirement spending assumptions to ensure they are still realistic.
Many Americans have been able to take credit for granted, but 2024 may be the year when access to credit finally becomes more difficult. Being vigilant about your credit score, spending less, and saving more may be the keys to thriving in this tougher credit environment.
If you enjoyed 7 credit management resolutions for 2024, you may like
Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.