It doesn’t matter if you have excellent, bad, or thin credit; it’s a constantly evolving score that improves or deteriorates over time. That’s good news for anyone who’s hoping to establish good credit. With deliberate actions, anyone can improve their score.
Not sure what those actions are? Here are some of the dos and don’ts of creating good credit.
✓ Do pay your bills on time
One of the best ways to build your credit score is by making sure you pay your bills on time every time. Your payment history has the biggest influence on your score, so it’s important you keep track of your due dates.
If you use a money management app, make sure to add regular bills to your digital budget. Most of these apps will send you a notification reminding you of upcoming payments, which can spur you to act before it’s too late.
For fixed expenses, or bills that cost the same every month, you should look into automating your payments. It’s easy to set up with your bank. All you have to do is authorize a payee and approve the payment schedule. Once in place, your bank will send the approved amount every month like clockwork.
✗ Don’t open new accounts frequently
If you make a habit of checking your spam folder, you may notice how many emails you receive from credit card companies saying you pre-qualify for an account. Even if you don’t take a deep dive into your junk mail, you’ll probably hear about the latest card promising 0% interest with amazing bonuses like rewards points and travel miles.
A low APR and cash back are certainly some of the biggest perks of getting a credit card, and you can take advantage of these to get the most out of a financial product you were planning on using anyway.
Just don’t get carried away — no matter how good the deal is. Every new account you open leaves a trace behind on your credit history. If you open too many of them within a short period of time, they will lower your score.
Open new accounts sparingly, making sure to space them out to limit their effect on your credit. More importantly, only jump on deals when you can confirm the advertised APR isn’t an introductory rate that will skyrocket after the first year.
✓ Do look into bad credit lending alternatives
The above tip helps people who already have good or excellent credit. With a prime score, you have the greatest options for credit cards and other products. You’ll have to make sure you limit how many of these products you open to maintain your score.
If you have bad credit, you might have the opposite problem. You may struggle to find a financial company willing to lend you cash.
That doesn’t mean you’re out of luck when you need help paying an unexpected bill or necessary auto repair. Some alternative lenders use other criteria when reviewing applications, giving people with subprime credit a chance at getting a cash advance or installment loan when they need it.
Take some time to research your options, and be sure to read this to see how lending alternatives like installment loans and lines of credit work for people with bad credit.
✗ Don’t pay just the minimum balance
A credit card is an open-ended financing option that lets you “revolve” debt from one month to the next. This is convenient when you run into a bit of bad luck that makes it hard to pay off your full balance. Your credit card company will calculate the minimum payment you have to make to avoid a late penalty.
Paying the minimum charge is ideal when the alternative is not paying it at all. However, you shouldn’t make it a habit when you have the cash to spare.
Each purchase you make with your credit card accrues interest at a higher APR than most personal loans. Accounting for the fact that it compounds every month you don’t pay off your balance, you’ll end up paying more for your purchase than its original price.
Paying off the full balance (or as close as you can) each month is one way to establish good credit. But like anything that’s important in life, it’s a little more complicated than that.
To improve your score or maintain good credit, you’ll have to commit to regular positive habits all year round. Make sure you follow every piece of advice on this list to earn a credit score you can be proud about.
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