February 26 – March 3 is America Saves Week. But why talk about saving in a credit advice column? The answer is that savings and good credit go hand-in-hand. You can’t have one without the other.
Experian and America Saves recently conducted a survey about consumer attitudes regarding the relationship between savings and credit. Complete results of the survey will be announced soon, but one clear conclusion is that people with poor savings habits also are more likely to have difficulty obtaining credit and will pay significantly more for the credit they can get.
Your savings are an increasingly important factor in lending decisions. Savings allow you to continue paying your debts on time during a life event that could reduce your financial resources such as an illness, injury or job loss. Because of this, having savings available to weather an economic setback also makes you a better credit risk.
How To Start Saving
Beginning to save or increasing the amount you’re saving can seem difficult, but it is possible. Here are some tips to help you get started:
- Reduce your existing debts. Continue paying at least the minimum on all of your accounts. Pick one and put as much extra toward it as you can until it’s paid off. Once paid off, take a portion of the payment amount and deposit it in a savings account each month. Put the rest toward another debt, and be mindful of which accounts you continue to use so that you don’t find yourself back in debt again after paying off the accounts.
- Save your change. Over several months it can add up. Deposit your coins in a savings account once or twice a year. You might be surprised. It could add up to hundreds of dollars.
- Find ways to reduce your spending. Do you really need all those cell phone minutescable channels? Is there a cheaper cell phone plan you can switch to? Do you use coupons at the supermarket? Could you cut out a cup of coffee or two each week? Maybe take lunch to work rather than eating out every day?
- Consider an automatic deposit savings plan. Talk to your bank or credit union and ask if it has a program to deduct a small amount directly from your paycheck and deposit it in a savings account. Automatic deposits let you “pay yourself first” and avoid the temptation of spending the money impulsively. You may also be able to automate a transfer from your checking to your savings each month. Even a small amount will start to add up over time.
- Review your credit report at least once a year. One trait of good savers highlighted by the survey was is that they actively review their credit history and use it as a financial tool to keep track of what they owe and make better financial decisions. You can also view your free Experian credit report online anytime.
You can find more saving tips and advice on the America Saves Website. For more information about other topics such as credit cards, credit reporting, credit scoring, and fraud and identity theft, visit Experian’s online credit education information.
Thanks for reading.
The “Ask Experian” team