I would love to tell my 20-year-old self a couple of things, from listening more to my mum’s gut feeling and making sure I prioritised quality over quantity in friendships to not overestimate the importance of sleep or sunscreen.
While we hear a lot about skin regimens, it seems not much is said about healthier credit habits. The truth is that maintaining a good credit score is crucial for many aspects of life, such as getting approved for a loan or buying a house. Unfortunately, people can easily make poor financial decisions that negatively impact their credit scores without even realising it.
From maxing out credit cards you can’t afford to pay down to missing regular repayments, these actions can have long-term consequences on your financial future.
If only I knew more about the impact of my credit score when I was in my late teens and early 20s. Back then, I was carefree and impulsive, often wanting things without considering the consequences. Although I didn’t have any credit cards, I did make some poor financial decisions, such as taking out a car loan for a vehicle I couldn’t afford and consistently missing bill payments, which could have impacted my score if I had recurring defaults marked against my credit report.
Thankfully, it didn’t! This is why I feel it’s important for people to understand the factors that impact their credit scores and how to make better financial decisions to build and maintain a healthy credit history.
It takes time to rebuild your credit score, and past decisions could make it harder to get credit when needed. In this post, I share five easy tips and tricks to help people stay on top of their credit commitments and build healthy credit behaviours.
Pay your bills on time
Late payments can have a major impact on your credit score, so it’s important to pay all of your bills on time. Simple tricks, like setting up a calendar reminder or putting bills on auto-pay, will go a long way. If you are struggling to keep up with the bills, be proactive. Call your provider to let them know. Many companies offer payment plans to assist you in managing the repayments.
Use credit responsibly
It is important to use credit responsibly and not overspend. This means only using credit for necessary expenses and paying off the balance in full each month. When you apply for new credit, always read and understand the terms and conditions to make sure you will be able to meet the payments.
If you find that you’re always maxing out credit cards, using short-term loan services that you’re unable to repay, or generally spending more than you make, then perhaps reassess if another line of credit is the right fit for you.
Watch out for new or unused credit cards
Every time you apply for new credit, it can impact your credit score. This is because when you apply for new credit, the lender will check your credit report. So next time, ask yourself if you really need it. If the answer is no, don’t apply for it.
The same goes for unused credit cards. Don’t let them sit in a drawer even if they have been fully paid off. In fact, some lenders may consider your account inactive and close it on your behalf without necessarily notifying you. Not knowing the status of an open account is not a healthy financial habit. Again, if you don’t need to use it, you don’t need to have it!
Keep track of your credit score
Knowing and monitoring your credit score regularly is the first step in maintaining a good credit history. You can get a free credit report from major credit bureaus like Equifax, or even use its credit monitoring service.
Seek professional help and advice
If you’re struggling to keep on top of your credit commitments or you’re trying to rebuild your credit, consider seeking professional help. Credit counsellors can provide guidance and support to help you get back on track.
Plus, there are many government and independent agencies that can help with setting up debt payment plans or help you in managing your debt repayments.
