Managing your credit can seem like a daunting task - but it doesn't have to be. Even if you've blown your budget and maxed out your cards, you can still take control of your credit and become financially fit in 2014.
Here are five things you should do right now to help get your credit back on track and sustain your financial reputation all year long:
* Review your credit report. Start with taking a comprehensive look at what's there, good and bad. Make sure you thoroughly review your report for any errors or mistakes, especially after the holidays. Tools like AnnualCreditReport.com let you check your report annually for free. It's also a good idea to check your credit score to see if it's dropped and to give you a basis for comparison moving forward. Resources such as Credit.com allow you to easily pull your score.
* Know what you owe. Tally up those balances and determine your debt to credit ratio - that is, the amount of money you owe on your cards versus your available credit, which accounts for approximately 30 percent of your credit score. If you're using more than half of your available credit, this will likely lower your credit score. This means that if you have three credit cards with a combined limit of $10,000, your total balance should be below $5,000.
* Be sure to pay your bills on time and at more than the monthly minimum. Sure, it's intuitive, but simply paying your bills on time accounts for about 35 percent of your credit score. Start with your holiday shopping bills and make sure that at least the minimum required balance is paid - even if you can't pay them in full. Also, pay more than the minimum payment every month to pay down your balance faster and decrease interest charges.
* Pay off the card with the highest interest rate first. These are the cards that are costing you the most, so paying them off ahead of a card with a lower interest rate will save you more money in the long run.
* Keep your cards open. Unless you have a compelling reason to close a card - for instance, if you're paying a large fee on it - it's best not to close credit cards, especially ones where you have a long positive payment history. When closing a card, not only can your debt to credit ratio increase, you also end up losing the history associated with the card and change the mix of your credit, which could negatively impact your score. And, in the future, do your research before signing on that dotted line. It may have been tempting to open up a retail store credit card to save 15 percent on a recent purchase, but those savings are now ultimately going to end up on your billing statement as interest. Instead, look for a card that works with your lifestyle. Review your options and find a card with a great rewards program and the lowest interest rate possible.
To learn more about budgeting, credit and personal finance, check out a recent Google Hangout, Better Money Habits: Understanding Credit. You can also visit BetterMoneyHabits.com, a free platform from Bank of America in partnership with the Khan Academy offering dozens of personal finance videos on everything from using credit to saving and budgeting that you can watch any time.