Charging things to a credit card or taking out loans might seem like a simple solution to get the things you need now and pay later. While this is true, credit and the money you’re borrowing can have life-long effects on your life.
Having a bad credit score can limit your ability to rent apartments, qualify for mortgages, raise your interest rates, raise insurance costs, and even stop you from getting a job.
There are a few simple things that you can do to make sure you have, and maintain, a good credit score. If you’re interested in learning how to maintain good credit, here are 7 tips that can help you out.
1. Get the Right Credit Card
One of the first steps to help build your credit is getting a credit card. However, not all credit cards are created equal.
Do your research to find which have the lowest interest rates, what the credit limit is, and other specifics of the cards you’re considering. You want a card that will let you use it in the smartest and most efficient way possible.
There are cards that are better for people with low credit and ones that will make it easier for you to increase your credit score (ones with low interest that you can pay off easily, etc). Here’s a list of credit cards for low credit: check it out!
2. Pay Your Balance In Full
Even though credit cards allow you to pay less than the full balance you owe, you should try and pay your balance in full each month. This shows that you are able to, and consistently do, pay your debts off.
Also, leaving large balances on credit cards is bad for your credit score and can cause your overall score to be lowered. Paying off the balance will prevent this from happening.
Not only will paying your full balance help maintain, and even raise, your credit score, it will also help you avoid accruing unnecessary interest.
3. Pay On Time
Besides paying your bills in full, you should do your best to pay on time. Late payments and skipping payments altogether will have a huge negative impact on your credit score.
It can be easy to be late or miss payments if you’re juggling a number of different bills, loans, and credit cards. But making sure that bills are paid on time is a key part of maintaining a good credit score. It shows creditors that you’re responsible and can be trusted with borrowed money.
4. Avoid Applying for Too Many Cards
Having too many credit inquiries, aka credit/loan applications, open at one time can lower your credit score. When looking into getting a credit card or taking out a loan, be smart. Don’t apply for every card out there, as this can hurt your credit.
Also, only apply when it’s really necessary. Unnecessary applications and credit inquiries can end up hurting your credit when you could’ve done something else to get the money or make the purchase in the first place.
5. Keep an Eye on Your Credit Card Balance
Credit cards can be dangerous for your spending: you can spend and spend without realizing how much debt you’re getting into. Before you know it, you can reach your credit limit with more money owed than you can afford.
Be sure to track your spending to make sure you aren’t overcharging and overspending. A main factor for determining credit scores is your overall credit balance and how long you have that balance for.
A high credit balance that isn’t paid off for a long time will hurt your credit. Not only should you be paying your balances off in full whenever possible, but you should also be keeping your balance as low as possible in the first place.
6. Leave “Good Debt” On Your Report
Once you fully pay something off, like your car or a home loan, people are tempted to want to erase the evidence of that debt from their credit report. However, leaving this kind of record on your report can actually help you maintain a good credit score.
Debt that you’ve fully and properly paid off is what’s known as “good debt.” Leaving this kind of debt on record on your report displays your ability to pay something back responsibly, and it shows that you have experience with loans and credit.
Instead of trying to get it nixed from your credit history, leave good debt on your report to help bolster your credit.
7. Watch Your Spending
We mentioned this briefly when we were discussing keeping an eye on your credit balance. You should try to make and stick to a monthly budget, especially when it comes to charging things on credit.
This will keep your credit card balances low and manageable; both of these things will help you as you’re learning how to get a good credit score.
You should also be wary of making to many large or extravagant purchases on credit. Suddenly spending more than usual and spending on large purchases, like expensive electronics or cars, is a red flag for creditors and for your credit score.
So while most of these tips involve things you should be doing, this one is something you shouldn’t do. Overspending and sudden large charges indicate you might be a risk, which can hurt your credit in the long run.
How to Maintain Good Credit: Wrapping Up
Learning how to maintain good credit is tough, especially when it’s so easy to charge things and forget about it. But if you follow these 7 simple tips, you should be on track to building a great credit score and learning how to manage your credit properly.
If you’re looking for other business or financial tips, check out our blog. We go over everything from taxes to student loans to the state of the current economy.