Did Your Credit Score Change Colors?

Autumn foliage may not be the only thing turning from green to red. Did the summer or back-to-school take a toll on your credit score? Now that fall is here, it’s a good time to focus on your credit score and credit usage.

Put in some work in now so you (and your credit score) will in better shape for the budget-stressing holiday season ahead. Otherwise debt from the summer and fall can snowball with upcoming holiday spending, for a financial blizzard you don’t want to get buried under.

Use this list to help spot changes and turn over a new leaf.

Gut check: Where are you right now?

Start with an honest assessment of recent spending. Gather your credit card and bank statements from the last three months and review them all together. Add up monthly and total spending in categories like entertaining/dining, clothing/personal items, transportation/travel, and interest/fees.

Now look for patterns. Did you go out to eat a lot? How much was spent on clothes or makeup? What did that spur-of-the-moment weekend trip really end up costing? How much was paid for late fees, penalties and interest? The numbers may surprise you.

This is important because monthly credit spending directly affects your long-term credit score. Missed or late payments might seem like a one-time thing, but they have lasting negative consequences on your credit score. It’s easy to overlook fees and interest when estimating in your head how much something costs, but it all adds up.

Update – or make – your monthly budget.

No one is that fond of the “B” word, but it is key to understanding where your money is going every month. If you have one, good for you! Look at your gut-check spending numbers and see if you need to adjust the budget. Are gas and transportation costs accurate in your budget? Are you listing out and making solid payments on all your credit cards, every month? Carrying high balances on multiple accounts can affect your credit score.

If you don’t have a monthly budget yet, make one ASAP! List out all the must-haves and how much you spend every month: housing, utilities, transportation, etc. Next, list out credit card and other debt by account, and how much you need to pay on them every month. Finally, list out discretionary spending, spending you can cut back on: entertainment, clothing, travel.

Knowing WHERE your money is going is a must-have for deciding HOW you can spend smarter.

Leverage technology: Try a budgeting/spending app.

It’s hard to budget accurately when you are on the go and the budget is written down at home. Technology can really help you get a grip on your spending. Try a budgeting or spending app on your smartphone. See if your bank or credit union offers a free app.

Look for one that can sync up with your checking/debit account(s) and credit cards. That way it can capture purchases automatically, to alert you as you spend. Having an accurate running picture on hand, in your phone, can be a huge help when making decisions in the store or online.

Once you have found an app that works for you, set a weekly calendar reminder on your phone or in the app, to review spending and see how much you have left to spend for the month. If you can afford it, set aside a little every month to automatically save.

Treasure hunt: Find new ways to save.

Get creative and find ways to cut back on expenses. Think of it as finding forgotten money. Who doesn’t love that feeling when you find a $20 in an old coat pocket?

  • Have a favorite restaurant? Check their specials, and pick the best day of the week to save cash.
  • Cable or satellite television can be crazy expensive every month. Try a free or low-cost streaming service, with shows delivered through your internet connection. Ask friends for recommendations.
  • Insurance can be boring, yes, but most companies give you a discount if you bundle homeowners/renters with auto insurance.
  • Have usable stuff collecting dust? Have a garage sale or list it online and sell it!

Ho-ho ahead: Plan now for holiday spending.

Seeing the Santa explosions in stores before Halloween can be annoying (ugh!), but now IS the time to plan how much you can spend during the holidays.

  • Start by looking at last year’s spending, with your credit card and bank statements
  • Estimate and write down how much you spent last year on gifts, travel and entertaining/events
  • Review this with your monthly budget: How much will you be spending for the necessities like mortgage/rent and utilities during the holidays?
  • Map out an accurate guide for how much you can spend THIS year on the holidays
  • List out loved ones and set an amount to spend on each one’s gift
  • Make preliminary plans for entertainment spending. Can another family member host Thanksgiving this year if you did it last year?

Now that you have a holiday spending guide, keep an eye out for sales. You can get good deals on gifts starting now. And you can spread out the gift spending, so it doesn’t hit your credit cards all at once in December.

Tame the shame: Don’t dwell on the bad.

One final – but very important – to-do this fall: Stop beating yourself up if your credit score or finances aren’t perfect. Give yourself credit for recognizing the challenge and taking action. Now that you have an accurate picture of where your money is going, use it to motivate yourself and get back on track this fall.

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