Do you want to improve your finances in the New Year? Improving your credit habits should be a key part of your strategy. Creditors view your ability to effectively manage debt based on your credit report and how you use credit responsibly.

An effective financial wellness plan should include a credit plan. Here are five tips for making smarter credit choices in the New Year.

1. Pay Your Bills on Time

Paying your bills on time has many obvious benefits. Maintaining good relationships with your service providers depends on timely payments. You will avoid getting your services shut off if you make payments on time. On the other hand, paying your bills on time also protects your credit from the effects of late payments. If a bill is 30 days late or more, it will appear on your credit report and hurt your credit score.

Call the vendor before you’re late if you think you’re at risk of making a late payment. They might be willing to work out an alternative payment plan or temporarily negotiate a lower payment amount.

2. Maintain Low Credit Card Balances

Your credit score will be negatively impacted by a high credit utilization rate, such as when your credit cards are close to their limits. Additionally, you’ll pay more in interest from month to month, and it will be harder to get out from under your credit card debt.

Maintain a low balance. Ideally, you should pay off your credit card balance in full each month to avoid excessive debt, high balances, and interest charges.

3. Pay Off Existing Debt

Your budget may be allocated to debt payments to a great extent when you have a lot of debt. A lot of debt can harm your credit and finances in many ways. Put together a debt repayment plan for the New Year if you feel your debt is becoming unmanageable (or if you just want to pay it down faster).

4. Check Your Credit Report

Monitoring your credit report constantly and being alerted whenever a change occurs should be an important component of your financial wellness plan. The next time you apply for credit, you don’t want to be shocked by inaccurate information. Incorrect information could even indicate identity theft. In the New Year, be aware of what’s on your credit report.

5. Increase Your Credit Intelligence

Since 2012, the number of consumers who know their credit scores has been steadily declining. If you don’t understand how credit works, you will not be able to manage your credit effectively. Making smarter choices in the New Year requires financial literacy and credit intelligence.

Is your personal information on the dark web? Make sure your identity isn’t at risk!