Last week, we discussed the importance of having sufficient emergency funds and a simple way to save for them.

This week we will discuss another critical area: debt and credit scores. Interest rates are currently at historic lows and are about to start rising. If you still have a mortgage, it may be an ideal time to lock in current low interest rates. If you have a variable mortgage, make it fixed immediately.

Over an extended period of time, this can add up to a lot of savings. It may be possible to use secured credit such as a mortgage to consolidate higher interest loans. You should only consider this if you have the discipline to do this as a part of a repayment plan to reduce overall debt. If you will run up the balance on credit cards and other high interest loans, you should not consider this.

Credit cards probably are your highest interest rate. Some charge 12% to18%. Miss a payment and your interest rate could jump to 29%.

This means if you pay them in full each month, you will not be charged any interest. If you are carrying a balance, you are not alone. About 61% of Americans have credit cards and carry an average balance of $6,194 according to Experian.

You never want to pay only the minimum or it could take years to pay off your balance. One strategy might be to pay enough to cover all current charges plus a fixed amount each month. Say you had a balance of $2,000. If you paid $200 per month more than your purchases, your balance would be eliminated in a year.

Many people wanted to improve their credit score, and there are several things you can do to accomplish this. The number one thing is to pay your bills on time. One way to do that is set up autopay. Not opening a lot of new credit cards will also help improve your credit score.

Be sure to check your credit report every year. It has been estimated that 25% of Americans have a mistake on their credit report. The free government website is It is free every twelve months.

Some people borrow against their income tax refunds. This is usually a bad idea. When a return is e-filed, as most are, you could receive your refund in two weeks or less if there are no issues with the return. Rent-to-own stores cater to people with poor credit. If you figure out the interest rate on these purchases, they might make credit cards look cheap.

To take steps to improve your credit score, inventory your outstanding credit obligations. Determine the ones with highest interest rate and search your budget to find ways to pay them off faster. Buy what you need and not everything you want. If you take these steps, you will feel less stress and put yourself in a much better position.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to

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