One of the best benefits of being a new parent is the unconditional love and acceptance you get from your baby. Infants don’t care how much money you make or whether you’re current on your mortgage. They don’t know a credit score from a cookie.
But if you love them back (and of course you do), you need to take care of your credit.
Your ability to secure and use credit will directly affect the quality of life you can provide for your baby throughout her life. Good credit can help you transport her safely in a quality vehicle, ensure she always has a roof over her head, pay for her college education, and even help you earn more money by landing a better job.
So what credit moves should new parents make? Here are five credit tips for new parents:
1. Check your credit report and score – You should be doing this regularly anyway, but when you know a baby is on the way, check it again. You’ll get an idea of whether you need to take dramatic steps to improve your credit, or if your score is already good and just needs maintenance work. Once the baby arrives, you won’t have as much free time. Having a credit improvement plan in place in advance means you won’t have to think about it when you’re sleep deprived and busy.
2. Pay down debt – From diapers and formula to strollers and cribs, babies come with many expenses. Getting rid of unproductive debt (like credit cards and other lines of revolving credit) before the baby arrives can help free up cash during those costly first years of your baby’s life. Paying down debt can also improve your credit score by improving your ratio of credit used to available credit. Improving your credit can help your efforts to secure favorable mortgage rates, or pay more toward an existing mortgage.
3. Build a budget – If you don’t already have one, you need to create a household budget. Budgeting is a vital tool in ensuring your family’s overall financial health. Following a budget will help you control your spending and start putting money aside for big expenses, like a college education.
4. Look at your insurance – You might have been able to cruise through your single years without life insurance and using your health insurance just once a year for your annual checkups. But having a child means frequent well-baby visits to the doctor, and trips for all the common sicknesses of childhood. Make sure you understand your health care policy before the baby arrives so you know what’s covered. If you don’t have life insurance, get it. If you have it, you may need more. Life insurance can help protect your loved ones from financial hardship if something happens to you.
5. Use credit wisely – Here’s one of the pithiest credit tips for new parents that we’ve heard: Don’t use credit to buy baby accoutrements that your child will outgrow before you’re done paying for them. When you see the cost of items like strollers and car seats, it’s going to be tempting to whip out your credit card. Instead, pay cash. If an item is too expensive for you to pay for it in cash, you may want to reconsider buying it. Plenty of less expensive items, like clothes, strollers and bedding, will do their jobs just as well as pricier versions.