Skip to content

How to make sure your credit is in great shape for the new year

Jan. 16, 2022
7 min read
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

A good credit score can make life easier in so many ways. Good credit (or better yet, excellent credit) can make it easier to qualify for generous rewards credit card offers, of course. It can also help you when you want to apply for other types of financing, such as a mortgage or auto loan. In some states, good credit can even come in handy when you set up an auto insurance policy, since better credit scores may equal lower insurance premiums.

Related: How much money can good credit really save you?

If you’re looking for ways to improve your credit or to make sure your credit stays in great shape, we’ve got you covered. Read on for five tips that can help you achieve and maintain a good credit score in the new year.

New to The Points Guy? Sign up for our daily newsletter and check out our beginner’s guide.

Review your three credit reports

Knowing where you stand is a critical part of attaining good credit. In other words, you need to review your credit reports from Equifax, TransUnion, and Experian.

Related: Your next credit card approval is in the hands of these 3 agencies

The Fair Credit Reporting Act (FCRA) lets you check your credit reports for free once every 12 months. AnnualCreditReport.com is the website you can visit to claim your federally mandated free reports. In response to the pandemic, the credit bureaus are allowing free weekly credit report access through this same website through April 2022.

Take notes

Once you have your credit reports, review each of them from top to bottom. You should make a note of any of the following details you come across.

  • Suspicious information: If you find credit reporting errors, incorrect balances, accounts or credit inquiries that you don’t recognize, add them to your list.
  • Credit cards with balances: The best way to manage your credit cards is to pay off your full balance each month. If you have accounts that you haven’t been paying off monthly (and you can’t afford to do so), make a list of each credit card and the balance you owe.

In the sections below, we’ll break down what to do if you find any of the issues above on your credit report.

Sign up for our daily newsletter

Related: 4 incorrect assumptions about your credit score

If you find credit errors, dispute them

(Photo by wutzkohphoto/Shutterstock)

Having accurate information on your credit report matters. Your credit reports, after all, are the basis for your credit scores. Credit scores affect your ability to qualify for financing and influence the price you pay for credit when a lender approves you.

According to a survey by Consumer Reports, 34% of consumers found at least one error on their credit reports. In some cases, credit errors can unfairly drive your credit score downward. So, if you find a credit mistake, it’s important to address it.

The FCRA works to your advantage in this situation. The federal law lets you dispute any credit report error with the credit bureau that’s displaying the incorrect data on your report. When you send a dispute, the credit bureau has 30 days to investigate your claim (sometimes 45 days) and either delete, update or verify the disputed information.

Related: 6 things to do to improve your credit in 2022

Pay down outstanding credit card balances

Your FICO® Score can range from 300 to 850, with higher scores indicating that you’re a better credit risk. If your credit rating isn’t what you want it to be, there are moves you can make to try to improve your credit score.

(Image courtesy of Experian)

Some credit score improvement strategies take time. Other approaches, however, have the potential to boost your score faster. Paying down credit card debt is one such strategy.

When you pay down a credit card balance, your credit utilization ratio should decrease. Credit card utilization — the connection between your credit card balances and limits — has a big influence over 30% of your FICO Score. As a rule of thumb, lower credit utilization tends to lead to higher credit scores. And don’t forget the biggest benefit of paying off credit card debt — it helps you avoid expensive interest charges.

Related: TPG’s 10 commandments of credit card rewards

Use caution when closing credit cards

There are valid reasons why you might want to close a credit card account from time to time — but trying to improve your credit score isn’t one of them. In fact, if you don’t cancel a credit card the right way, your credit score could drop.

When you close a credit card account, a credit scoring model will no longer consider the account’s credit limit in your credit utilization ratio. Without that extra available credit limit, your utilization rate may rise, even if your overall credit card debt stays the same.

The good news is that it’s possible to close a credit card without experiencing credit score damage. If all of your credit card balances are $0 according to your credit report when you close an account, no utilization increase should happen.

Related: What to do before you close a credit card

Make on-time payments every time

Not only is it important to pay your credit card bills in full each month, but you also have to pay on time. That rule of thumb applies to every credit obligation you have — credit cards, loans and more. Late payments could damage your credit score in a hurry, even if you’re just 30 days past your due date.

If you’re worried about forgetting a due date, you might consider scheduling automatic payment drafts for at least the minimum amount due. Setting reminders on your smartphone or computer could also help.

As for any late payments already on your credit report, the negative impact they have on your score has a time limit. The FCRA makes the credit bureaus take late payments off your report once they are seven years old. Furthermore, the older a late payment becomes, the less it affects you. A brand new late payment might have a big impact on your credit score. A late payment that’s five or six years old, on the other hand, is less significant from a credit score standpoint.

Bottom line

Keeping your credit score in great shape requires consistent effort. But once you get used to reviewing your credit reports frequently, making on-time payments and paying your credit card balances off each month, these habits become easier to maintain. Best of all, the benefits you can enjoy when you have good credit can pay off over and over again.

Featured image by Shutterstock
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Top offers from our partners

How we chose these cards

Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
See all best card offers

TPG featured card

Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

2 - 10X points
10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day

Intro offer

75,000 bonus miles
Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

Annual Fee

$395

Recommended Credit

740-850
Excellent
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023
Best card for premium perks while traveling
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
5X5X miles on flights booked through Capital One Travel.
2X2 Miles per dollar on every purchase, every day
  • Intro Offer
    Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel

    75,000 bonus miles
  • Annual Fee

    $395
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
    Excellent

Why We Chose It

The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023