Having good credit doesn’t come by accident. There is thoughtfulness and an intention created to establish good credit.
If you have bad credit and don’t know where to start, first look at what people with good credit are doing. Then do what these credit role models do.
Here is a glimpse into how people with good credit, treat their credit.
1. They start building credit at a young age
When it comes to your credit, the earlier you start building a good history, the better. Length of credit history is a factor in your score.
If you are younger adult, you may be avoiding getting a credit card because of the responsibility that comes with it. Don’t let that stop you. You want to start before really need credit. Look into the future, think about when you want to buy your first car or your first home. What you if don’t get approved because your sparse credit history. Set yourself up for success and start building credit as soon as possible.
Keep in mind, if you are younger than 21 years of age, you will need to provide evidence of sufficient income or supply a cosigner.
2. They keep tabs on their credit report
It’s critical to keep a watch on your credit report for errors and signs of unusual spending. You don’t want to be penalized unnecessarily or have undetected fraud on your account.
People with good credit monitor their credit score regularly to see where they at. If there is an area for improvement, that can be addressed right away.
TIP: You can start monitoring your own credit score for free. Credit Sesame provides free credit reporting, helping you to understand your credit score and what affects it.
3. They try not to carry any balance
Interest is a killer. You work hard for your money and it should go to paying for real things that add value to your life. People with good credit work to make payments in full so they aren’t taken advantage interest-wise. You never want to get in a situation where you are paying so much interest that you’re sinking in a well of debt.
If you don’t have the means to pay, you need to start thinking of ways to decrease your spending, or increase your ability to pay. It’s important to be resourceful and brainstorm when it comes to your credit.
4. They have a low credit utilization rate
Credit utilization rate is your total credit used (balance) divided by the total credit available.
For example: You have two credit cards with limits of $8000 total. You currently have a $2750 combined balance. You credit utilization rate ise $2750 / $8000 * 100%. That comes to 34.4%.
When your utilization rate is low (30% or under) it sends a message to creditors that you can be trusted with their money. People with good credit monitor their utilization rate.
Just like people with good credit, you need to understand that a history of good credit is beneficial to your credit score. Don’t shut down your oldest, highest limit cards at the first opportunity. Look for opportunities to increase limits and decrease your credit utilization rate.
5.They’re organized and enroll in auto-payment plans
You won’t see 8 month old bills piled up in an enormous hill of old mail and papers on their coffee tables. They understand that paying money because you forgot a date is unnecessary.
People with good credit often enroll in auto-pay. Auto-pay from your bank account ensures you do not miss you payment due dates. In addition to auto-pay, it’s a good idea to set a reminder on your phone or calendar reminders prior to deadlines. Take a tip from the people who do this right and stay organized. You always want to double check your bill is paid and there are no additional payments to be made.
6. They don’t spend above their means
People with good credit pay their bills on-time, what does that say about them? They’re in the financial position to pay their bills, and they’re not over-spending.
This sends a message of reliability to creditors and people with good credit reap the reward that come with good credit. Good credit enhances quality of life with better financial product opportunities It is incredible important to send a message to creditors that you are trustworthy so that they offer you the best loans, interest rates and fees. Reliable people gain more credit and better rates, which will boost credit scores even higher.
7. They double down on payments
People with good credit scores understand the necessity paying on-time and in full, every month. If they do start to get behind, they face their circumstances and understand why it’s important to be proactive and get their balance back in control.
When they do have the means to pay, they will pay extra or twice per month to get their balance back to zero. It’s so much easier to start off on the right foot than to dig yourself out of a hole.
8. They use cash and debit, too. They don’t use plastic for everything
While they may have several cards, plastic isn’t an excuse to feed into a buying compulsion. Buying can feel good, but people who have good credit have this under control.
When people pay with cash, the feel of the money in their hand and seeing the money go, often leads to decreased spending. Paying with cash or debit also ensures that you’re spending the advertised amount (not an inflated price from compound interest).
People with good credit have found the balance between using their cards (yes, you must use your cards to establish credit) and not overusing their cards.
9. They budget and keep their spending (and credit usage) in line with that budget
People with good credit recognize the consequences of failing to do so. In addition to consequences, they understand the benefits.
Having good credit will lend to a better quality of life. People with good credit understand how to withstand temptation. Is that extra pair of shoes, or name brand tech gadget really worth the stress you will feel when you can’t pay your credit card? Take a hard look at your income and what you can afford within it. Things will only provide you with temporary satisfaction. Knowing that you are living a life of integrity by making payments on time and investing in your future will provide you with a sense of true joy and confidence.
Take action now. Find out your credit score and see where you stand. Start implementing the behaviours of people with good credit. Improving your credit will provide you with peace of mind and build your confidence knowing you are a smart, capable and responsible human being.