Among all the strategies out there for improving your credit standing, it’s important to take note of the things that are easy. Some of the best ways you can help your credit are so ingrained in your day-to-day routine, you’re probably working on your credit without really thinking about it. The simple, carefree route to good credit — sounds nice, doesn’t it?
1. Using Your Credit Card
Not everyone has credit cards, but if you do and you use them for everyday purchases, that habit can be really good for your credit. You’ve probably heard variations of the the phrase, “You have to use credit to build credit,” and it’s a very true one.
By routinely using a credit card and making payments on time, you’re showing potential lenders you’re a responsible borrower and can be trusted with credit. Every time you swipe that credit card and then pay it off on time, you’re building your credit history.
There’s an important balance to this habit: If you charge a lot of purchases and your balance creeps up toward your credit limit, you could start damaging your credit score. It’s smart to keep your balances lower than 30% of your credit limit — the lower your level of debt, the better for your credit score.
2. Paying Your Bills
There’s probably not a week on your calendar that goes by without some bill coming due. Paying them on time will help you avoid late fees and having debts sent to collection agencies, though most payment history for everyday bills (like rent or utilities) aren’t reported to credit bureaus or factored into credit scores.
Paying your bills on time doesn’t necessarily help you improve your credit, rather it helps you avoid hurting it. This upsets a lot of people: You don’t directly benefit from paying your rent on time each month, but once you miss it, your credit could start to tank, either as a result of a collection account showing up on your credit report or getting evicted (that also will be reported to credit bureaus).
If you have poor credit or no credit history, you can work with an alternative credit reporting agency to use your everyday bills as steppingstones to a well established credit history. Regardless of where your credit stands now, prioritize paying all your bills, so you can stay out of trouble.
3. Checking Your Accounts
If you don’t already check your financial accounts every day, it’s a good habit to get into. Even if you have a lot of accounts, it won’t take you much time to review your recent activity online and help you quickly spot anything unusual. Mistakes happen: You may get double charged for something you bought or a service provider can bill you incorrectly, but you may not know if you’re not closely watching your transactions. This could lead to a higher credit card bill than you’re expecting.
Consequences could be worse than that: By not keeping your eye on your accounts, you might be letting someone get away with making unauthorized transactions or committing some large-scale fraud in your name. Generally, it’s good to know where you’re money is going, because it helps you live within your means and avoid debt. Unfortunately, only about a third of Americans keep a detailed household budget, according to a 2013 Gallup poll.
4. Using Common Sense
There’s always a new way scammers are trying to trick people into sharing personal information or money, but a lot of commonly used tactics have been around for a long time. Be smart about the links you click online and the entities you trust with your personally identifiable information, but don’t forget to practice good habits like not saving all your login credentials on websites (especially financial ones) and changing your passwords regularly.
5. Doing Nothing
Patience is huge when it comes to improving your credit. To many people, that’s extremely frustrating, because no one wants to wait years to build a good credit history so they can benefit from its perks (good interest rates, access to better credit cards, and so on).
You have to use that credit card for months or years before your credit score changes drastically. There’s nothing you can do about those loan delinquencies other than wait for them to age off your credit report.
Waiting isn’t fun, but it’s often the easiest and most effective way to manage your credit. If you’re working your way up, it’s important you rarely apply for new credit, because hard inquiries on your credit report (when a potential creditor requests your report to make a lending decision) will hurt your credit score a little bit, and a lot of those inquiries in a short period of time can add up to a huge drop in score.
If your goal is to improve your credit, make sure you’re keeping tabs on your progress — you can get a monthly credit report summary on Credit.com, which includes two of your credit scores — but it’s crucial to maintain patience throughout the process.
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