No matter your profession, you need to have good credit to your name. From helping you get affordable loans to lowering your insurance premiums, a high credit score can help you every step of the way.
While people think that obtaining a good credit score is a pipe dream or at the very least a mean feat, nothing could be further from the truth. By following tried-and-tested suggestions, you can easily lay down the foundation for a high credit score.
To guide you along this road to financial wellness, here are a few best practices for establishing and growing your credit.
Get a Good Credit Mix
Whether you follow the best finance YouTube channels or get your advice from news publications, you may often hear the suggestions to get a good credit mix for your lending products. This includes installment accounts like student loans and revolving accounts like credit cards. When you have both types of credit accounts, it can make for an ideal credit mix and show that you can handle different lending accounts with ease.
Be on Top of Monthly Payments
No matter the type of lending accounts you have, you should always make their monthly payments on time. This holds true for your loan payments and credit card payments alike. When you submit these payments on time, it can have a positive effect on your annual credit report and get you to achieve a good credit score for yourself. Solutions like reminder apps can help you with this ongoing practice.
Pay Off Balances in Full Whenever Possible
Besides ensuring that you make your monthly payments for loans and minimum payments for credit cards, you should also try to pay off the entire balance for the latter, whenever possible. This gradually but surely increases your score, while also shaving off high interest payments every month. In turn, you can make big strides in your budgeting app or journal for better management of your monthly finances.
Decrease Your Credit Utilization Ratio
Credit utilization ratio refers to how much of your approved credit you use from revolving credit products like credit cards. For example, if you have a $1,000 credit card limit, using $200 means that you are at 20% of your credit utilization ratio. In any case, you should keep this ratio less than 30% to improve your credit score. You need to follow this practice whether you make money on YouTube or other platforms.
Increase Your Approved Credit Limit
A simple way to lower your credit utilization is to get higher limits for your credit cards. This can help you automatically lower your credit utilization percentage and allow you to improve your credit score. With that being said, you need to be mindful about your spending by learning tips like supporting your favorite YouTubers for free. Otherwise, the higher limit can become a slippery slope towards excessive spending and major debt.
Don’t Apply For Unnecessary Credit
Once you have a good credit mix of an installment product and a revolving product, you should be wary about applying for new credit. It’s because whenever you apply for new credit, it makes your lenders do a “hard inquiry” into your credit report that ultimately decreases your credit score. That’s why you should look into alternative money management methods like using a cash back platform to save money on everyday spending.
Regularly Check Your Credit Reports
While your financial activities are automatically reported to credit bureaus who then calculate your credit score, sometimes there are errors in this reporting. For example, you may not even know that your credit score is being impacted by a medical bill that you settled months ago. To avoid these problems, make it a habit to check your credit report at least once a year. You can use a scheduling app to manage these reminders.
By adopting these practices, you can build and improve your credit without any added stress. This can help you benefit from financial support at better terms and lead you to live a comfortable life.
