8 Do's and Don'ts of Credit
This is an old photo of me on the flying trapeze - I love it!
Here’s how to make sure you are doing everything you can to maximize your credit score. While it is not by any means an overall measure of your financial health, it can be helpful - see why in this article I wrote for a primer on what your credit score is.
Don’t carry a credit card balance just to try to look good
Carrying a balance does not help your credit score. Using your card even a little bit to keep it active will help increase your score by showing responsible use.
Do pay off your credit card in full each month (or even more often!)
Do not pay interest on your credit card. Do not pay interest on your credit card! Pay off your balance at least every month if not even more often.
Do make on-time payments.
Even a single late payment can hurt your credit. Your on-time payment history is one of the biggest factors in your credit score. The later a payment is, the more it can hurt your score too.
Don’t let your hard credit inquiries add up in a row
A little strategy around mortgage shopping, opening up new credit cards, or applying for car loans can go a long way. A hard credit inquiry (you “asking” for credit) will go on your credit report (you can see this for free at annualcreditreport.com), but a soft credit inquiry (e.g. you checking your credit score at mint.com or creditkarma.com) will not.
Do keep your oldest account open to maximize your credit history.
While you may want to close old accounts (and you have good reason to), you should consider the tradeoffs of the lost credit history. While the closed account will stay on your credit report for 7 years after it’s closed, it will drop off at that point and be removed from your report.
Don’t worry about going for the fanciest credit card your friends have.
I am of the opinion that the best credit cards are often the simplest ones. Getting regular cashback every month can be great! (I personally just have the Chase Freedom 0% APR cashback rewards card, and love it.) Think hard about whether any credit card is worth 1) the annual fee, and 2) the hassle of an additional card/bill/account/points-tracking.
Do monitor your credit score every month (it’s free and doesn’t affect your credit!)
You can check your credit score along with a credit score summary of the key factors that go into your credit score at a number of places including mint.com and creditkarma.com. Take advantage!
Don’t prioritize your credit score over your actual financial wellness. (they are not the same!)
You are not your credit score. Your financial health is not your credit score. A credit score is just one aspect of your financial life - how you handle debt. It does not reflect the innumerous other pieces of your financial life! It is not worth harming your actual financial life for your credit score - now that’s just backwards :)
Want some help making sure you’re building your credit effectively? Reach out to me at sarah@momentumfinancialcoaching.com or schedule a free intro chat.
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