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How to Protect Your Credit Scores by Evaluating Credit Card Debt

5/30/2012

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Typically every spring, we all like to spend time tackling home repairs that may have fallen by the wayside over the winter months. But there’s one more important spring-cleaning task you shouldn’t forget to add to your To-Do list: reviewing your credit and finances. It’s a great time to assess your total debt and get an understanding of the outstanding payments your need to make throughout the year, as well as the effect your borrowing is having on your credit scores. Here are easy tips to follow as you prepare your credit for the year:

Take stock of your credit cards. Often, our credit card debt is comprised of unnecessary spending. By understanding how much of your monthly income is going toward things you really don’t need, you will be in a better position to figure out ways to reduce your debt and help protect your credit. One way to take stock of your spending is to list all of your current credit cards and their corresponding interest rates. Since charges from interest rates can slowly add up and increase your debt, you should determine which of your credit cards is costing you the most money. Then, use this knowledge to make an informed decision about which credit cards are not worth using for a while.

Analyze where the debt came from. Just as home repairs can be seasonal, your credit card spending can increase and decrease in certain seasons. So, when you sit down to analyze your spending, you should be sure to make note of the time period when the most spending occurred. For instance, by determining the true cost of your holiday borrowing, you may be able to better adjust your budget in order to begin saving for the next holiday season, so that you will have an idea of the kind of debt you may be adding at that time.

Prioritize your high-interest debt. After conducting a thorough analysis of your credit card spending and debt, check credit scores, credit reports, and savings account(s) to see where you stand. Then, use that information to consider where and how you might want to allocate your upcoming credit card payments. By focusing on debt with the highest interest first, you maybe be able to eliminate some of your wasteful spending this spring, as long as you continue to make timely payments and stay on top of your debt.

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