Good credit habits can help you get the credit you deserve
It’s a fact of life: If you want access to credit—whether through a loan or a credit card—you have to show the lender that you’re willing and able to pay back what you borrow. But to get the credit you deserve, you have to do more than act responsibly. You have to make sure that your activities are recorded properly in the credit reporting system.
Here are some tips on how to make that happen.
1. Pay on time, every time.
On-time payments—for all your bills, not just credit accounts—are the foundation of a good credit history. To help make sure you pay on time, you can:
Double-check the due date each month when your billing statement arrives. It’s easy to remember, since your payment is always due on the same date each month.
- Consider paying online to avoid delays in the mail.
- Sign up to have alerts sent to your computer or mobile device to remind you when your payment is due.
- If you’ve got too many bills due at the same time, ask your credit card company to change your future due dates to a more convenient time of the month. (Be aware that the change can take up to a month to take effect.
2. Borrow enough, but not too much.
If you never borrow at all, lenders have no way of knowing about your repayment habits. But if you borrow too much, you could find yourself in trouble. It’s all about finding the right balance. A few good rules of thumb to follow are:
- Make a budget, and keep your credit card and other loan payments—not including rent or mortgage—at less than 20 percent of your net monthly income.
- Stay within your total credit line, and avoid using the full amount of your available credit. Maxing out your cards can make it seem like you’re having trouble with repayment.
- Manage your available credit. Too much available credit is risky for both you and your lender. Work with your credit card company to keep your total credit line at a level that you can reasonably repay.
- Over time, use different types of credit, including credit cards, installment loans or a mortgage. This shows you can handle different types of financial situations.
Managing Credit Tip #11
Did you know that 35% of your FICO score is based on your payment history? So, know your payment due dates and pay your bills on time, every time.
3. Pay more than the total minimum payment.
Substantial payments are a good sign of your willingness to repay a debt. Plus, if you only pay the total minimum payment on your credit card each month, you could be in debt for a long time, you’ll pay a lot more in interest, and your debt could grow instead of shrink. Strategies to help keep your debt under control include:
- Pay your balance in full each month to minimize interest charges.
- If you can’t pay in full, pay as much as you can.
- If money is tight, try paying the amount of new charges plus the interest charge. This will at least keep your balance from growing.
4. Maintain old accounts.
Keep at least one account open that you’ve had for a while. Use it occasionally—and pay it off in full—to show you have a long history as a responsible borrower.
5. Guard your good name.
Don’t let errors, fraud or identity theft ruin your reputation as a trustworthy borrower. The best way to do that is to prevent problems when you can, and correct any that you can’t prevent. Make it a habit to:
- Check all billing statements each month for accuracy.
- Review your credit report from each of the three major credit reporting agencies (TransUnion,® Equifax,® and Experian®) at least once a year and promptly report any errors.
- Take precautions to protect your credit card and account numbers from fraud.
6. Deal with problems promptly.
Even the most responsible people can get into credit trouble when they lose a job or have health problems. If you’re in a situation that’s making it difficult to manage your credit card payments, talk to your creditors immediately. They may be willing to work with you to come up with a solution.
Take action now.
A good credit history can help you save money while you work to achieve your financial goals. So make good credit habits part of your financial plan.
You can request one free report per year from each of the three major credit reporting agencies by visiting www.annualcreditreport.com or by calling 1.877.322.8228. Or visit each agency online:
What's next? How to protect your financial information