4 Simple Ways to Get Good on Your Credit

06.14.2022 - By: Anastasia Barbuzzi

This week I reintroduced the #HoneYourHabits series on the podcast, which is inspired by David Bach's The Latte Factor, an ode to millennial money habits (like your daily latte).

Every Monday morning you can tune into these bite-sized episodes (10 minutes or less!) for tips, tricks, and mindset shifts that will help improve your financial literacy and money habits to live a healthier, happier lifestyle.

On this week’s episode, we learn how to get good on our credit in four simple steps. Interested? Keep on reading to improve your credit standing in a matter of weeks.

Tap or click this image to listen to the **latest #HoneYourHabits episode**! 👆🏼

STEP #1: ALWAYS MAKE MORE THAN YOUR MINIMUM PAYMENT

Although it might seem a little obvious, your balances hardly decrease when you make only minimum payments on your credit cards.

Not paying off your balances in a reasonable amount of time can result in late payment fees and higher interest rates for periods.

So, do your best to make more than the minimum amount due on each card ($50 extra bucks works!). Paying more than the minimum amount will ultimately reduce your credit utilization, which is good for your credit score.

Also, a good payment track record will make it easier for you to get a credit card in the future.

STEP #2: DON’T CANCEL YOUR OLD CARDS

Now, this tip I learned from @xoreni, a resource I really admire on social media who’s been doing a whole series on why you shouldn’t close your old cards (even if you’ve paid them off and would rather burn them).

Here’s the gist: nicer, better credit cards may be available to you, but don’t close your old cards. Doing so shortens your credit history, which is a key factor in determining your credit score.

If you’re still stressing over old cards because the annual fees are expensive, call your credit card company and ask if they can downgrade your card to their no-fee credit card option.

Once this is done, you may not get as many benefits (points, airport lounge access, air miles), but it’s a great way to maintain your credit accounts, according to Reni.

STEP #3: MONITOR HOW MANY CARDS YOU’RE APPLYING FOR

Also a hot tip from Reni: applying for numerous cards (or conducting multiple credit inquiries) at once can be a major no-no.

A credit inquiry is a request from a financial institution for your credit report information, and according to Reni, credit inquiries make up 10% of the credit score calculation.

If you think about it, applying for a mortgage, a new credit card or a line of credit all around the same time can make it seem like you’re on pretty thin ice financially.

Basically, you’re indicating to the credit bureau that you require credit to pay for things and may be less likely to pay your debt back— because you’re super low on funds.

That said, it’s important to remember that there are hard inquiries and soft inquiries, and they impact your credit score differently. This brings me to my next point…

STEP #4: BEWARE OF SOFT & HARD CHECKS ON YOUR CREDIT

There are several opinions about this on the internet, but the general consensus is that checking your credit reports or credit scores will not impact credit scores.

In fact, regularly checking your credit reports and credit scores is an excellent way to ensure your information is accurate.

On the flip side, requesting numerous hard credit inquiries will impact your credit score. Hard credit inquiries are more intensive. Take, for example, mortgage and car loan applications.

Regarding soft credit inquiries, think of background checks and calculating your credit score on an online application (like Credit Karma, Borrowell, or Equifax).

All makes sense, right? Hopefully the four steps we covered help you get good on your credit starting today. If you want to learn more about this topic live, check out the latest #HoneYourHabiits episode on the podcast.

Looking forward to hearing about what you learned or how these tips added to your financial education! 💚