5 New Year’s Resolutions to Better Manage Your Money in 2023
9th January 2023
The new year is a time of fresh new opportunities. Getting on top of credit scores and debt management is something that many people will want to be doing going into 2023, particularly given the current cost-of-living crisis and rate of inflation.
Having a bad credit score and being in debt can be difficult, both practically and emotionally, but fortunately, there are several ways you can improve your credit and debt management, and we’ve listed them here in the form of some new year’s resolutions.
1. Be Disciplined With Your Budget (Or Create One)
The first thing you can do to prevent existing debts from getting any worse is to be strict when it comes to budgeting. If you already budget, then ask yourself how strictly do you actually adhere to it. If you don’t already have a budget, then simply creating one can have a huge impact on your debt management.
Something that puts many people off making a budget is that they think it has to be more complicated than it is. In reality, though, it’s really as simple as tracking your incomings and outgoings, and there are also a huge number of budgeting tools online that you can use to make your budgeting as easy as can be. Budgeting apps are intuitive, easy to navigate and, most importantly, free (or at least feature
2. Consolidate Your Debts
One of the things to consider is consolidating your debts. What do we mean by this? Well, if you’ve got multiple open credit lines and loans to repay, it can quickly become overwhelming. The more separate debts you have to repay, the more likely you are to forget about one, incurring additional charges as a result, and putting you into more debt.
Consolidating your debt enables you to pay off all your existing repayments – be that a bank overdraft, store card, payday loan or anything else – by taking out one, singular debt consolidation loan. That way, you only have one monthly repayment to worry about, which is both more manageable and less likely to be forgotten about.
If the interest rates on your repayments are particularly high, or you’re struggling with monthly repayments because of how short your current loan’s credit agreement terms are, then consolidating your debt with one loan over a different period (and with lower interest rates) could help. However, it is important to remember that the longer the term of the loan the more interest you will pay.
What’s more, having a bad credit score won’t automatically rule you out from being able to take out a loan to consolidate debt, however, your individual circumstances might affect the APR offered for your loan, as well as its terms.
3. Keep Your Credit Utilisation Low if Possible
Your credit utilisation rate (or ratio) is the amount of credit you’ve used on an account in relation to your overall credit limit. For instance, if you hold a credit card with a credit limit of £2,000, and your balance is £500, then your utilisation rate would be 25%. It’s important to note that your credit utilisation rate is taken from the cumulative credit balance and credit limits of all your credit cards.
It’s generally accepted that a credit utilisation rate of under 30% is considered to be good. Above that figure, your credit score might be impacted (particularly if you go above 50%). Conversely, then, if you have a high credit utilisation rate, then paying off your card when you’re able (beyond the monthly minimum payments) and bringing your ratio back down below that 30% mark is likely to help your credit score.
4. Consider Applying for a Credit Builder Card
Credit builder cards are a special kind of credit card that typically come with low spending limits and high-interest rates. One of their main benefits, besides helping you boost your credit score over time, is that they’re more easily available to people with poor credit scores, low incomes or CCJs (County Court Judgements) on their record.
To use a credit builder card properly, it’s advised that you stay comfortably within your credit limit and maintain a low level of credit utilisation, as well as pay off any outstanding balance in full wherever you’re able. These cards encourage spending (and then quickly repaying) little and often, which over time, will help slowly build your credit score.
However, because of their high-interest rates, it’s important that you’re sure you can use these cards as described above. Otherwise, your debts may actually spiral, negatively impacting your credit score and negating the very reason you got the card in the first place.
5. Don’t Be Afraid to Ask For Help
This is an important one. If ever you feel like your debts are getting on top of you, there are people and organisations out there who can help you, and you don’t have to go through it alone. Citizens Advice, for instance, has a wealth of resources and information on the topic, as well as debt advisors who you can talk to if things are getting out of hand.
Don’t bottle things up either. This piece of advice might not immediately help bring your debt under control and improve your credit score, but talking to friends and family members about your situation can act as a seriously helpful outlet.
Think of a pressure cooker; if there’s nowhere for the steam to go once the pressure gets too high, it can lead to an explosion. Your support network is like the safety valve on that cooker, helping bring things back down to a more manageable level, mentally speaking. Don’t ever underestimate the power of talking.
If next year’s the year you get on top of your credit score and debt, then let these new years resolutions help guide you. With patience, consistency and time, you’ll be able to start pushing that score up, and those debts down.