New Year’s Resolution: Take on Less Debt to Keep Your Credit Healthy


The average New Year’s resolution is long forgotten by February, but 2016 is the opportunity for a fresh start. High debts are among the top reasons for credit damage. In fact, 65 percent of your credit score depends on timely payments and debt utilization — or your account balance versus your total credit limit.

Follow the tips below to take on less debt this year:

  • Follow a budget. You can’t find credit success without a map. Setting up a budget is the best way to track spending, establish saving goals and focus on debt reduction. Download our free template here to get started.
  • Assign credit cards. Overspending is easy when your credit cards have no purpose. By assigning expenses to each credit account, you are more likely to follow a budget and avoid straying. For example, use your Visa to buy groceries and your MasterCard to pay for gasoline and daycare expenses for your kids.
  • Look for savings. Perspective plays a critical role in minimizing debt. While life is expensive, there are plenty of ways to save on everyday expenses and stop debt in its tracks:
    • Save $5 a day. Small savings add up quickly when you invest. Learn more here about how anyone can build a full nest-egg.
    • Take the 24-hour challenge. How much money do you spend in a day? The answer is a surprise to many, and seeing the number in print could motivate you to change. Click here to get started.
    • Look online. Technology has given us the ability to price compare on everything from groceries to electronics and textbooks. Sites like also provide quarterly cash back simply for shopping at hundreds of well-known retailers. Take advantage of these tools on the road to savings.

Consider safeguard math. Working with lenders means understanding how they view your debt. For example, suppose you plan to buy a house in June. Federal law says that a mortgage cannot exceed more than 43 percent of your gross monthly income. That said, mortgage lenders consider your existing debt-to-income ratio in the preapproval process. Things like mortgages, auto loans, personal loans, student debt, and credit card balances all impact debt-to-income ratio. If your current DTR exceeds 40 percent, you’ll have trouble getting a mortgage loan. Talk to a financial planner and credit repair professional about how to reduce these burdens before applying for new credit. Lowering debt is an essential part of raising your credit score. Don’t allow debt to shape the course of your future.


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How to Keep Your Credit Resolutions