Coloradans urged to “spring clean” credit to set up financial success for year, experts say

Many people spring clean their homes, but spring cleaning your credit and finances can be beneficial, as well.

Cynthia Chen, the founder and CEO of Kikoff, believes that tidying up your finances now can set you up for financial success for the rest of the year. Kikoff is a personal finance platform that helps consumers build credit, reduce debt, and save money.

Chen says now is a good time to spring-clean your credit because many people are getting their tax refunds. She recommends sitting down, doing some financial planning, and making the most of the money you get back.

“Some of the money can be used to satisfy some of the debt collection accounts to make your credit reports cleaner. Some of that money can be used to pay down or even pay off a credit card balance, which will reduce your utilization rate and then significantly improve your score,” said Chen. “If we use a spring to address some of the negative items on your credit reports, then you may have a much better credit score that will hopefully get you approved for a credit card that you can use for your summer vacation and your holiday shopping.”

The average credit card debt an American has ranges from $5,300 to $6,700 per person, according to American Express.

Chen also recommends having a plan to tackle debt, especially high-interest debt. Make payments early or above the minimum and lower your credit card utilization rate to less than 30%.

Also, do a health check of your credit. Look at your credit reports across the three major credit bureaus, including Equifax, Experian, and TransUnion. Verify that the information has been reported correctly and dispute any errors or unfamiliar accounts to the credit bureau.

“The three different credit reports may show different information from different lenders, so get a complete picture and then see what you have, and if you agree with all the information reported. Sometimes, the lender may misreport. Maybe you were on time for a payment, but they accidentally reported you as late. Audit each line item or credit report,” said Chen.

Keep in mind, when you apply for a credit card, there will be a hard inquiry on your credit score, dropping it by a few points temporarily.

Don’t apply for credit cards if you’re planning on applying for a mortgage. Use your credit card to buy things you can afford to pay in full and pay off your balance every month.

Also, consider keeping accounts open to boost your credit score. If it’s a credit card without an annual fee, is still in good standing, and shows you’ve maintained on-time payments and established credit history, consider keeping it open.

“The older your average account age, the higher your score. Because if you have kept a credit card open for, say, 20 years and it is still open in good standing, that means you really maintained very good payment hygiene for 20 years, which shows you are very credit-worthy. So just be very careful when you choose what accounts will close,” said Chen.