Before I had a credit card — before I even knew what a credit card was — I knew credit card debt was something to be avoided at all costs. I hadn’t yet graduated from banking of the piggy variety, and my mom already had me thinking about debt. She used my childhood curiosity as a teaching opportunity. She’d be balancing her checkbook, paying bills at the department store or checking out at the market, and when I asked, “Whatcha doin’?” (which happened a lot), something about financial responsibility came up. I figured it was just something accountants did — incorporate money lessons into every day chatter.
It’s a good thing my mom drilled her credit card strategy into me, because unlike many of my friends, I didn’t learn about credit card responsibility the hard way. As it turns out, years of following her own rules got my mom to a near-perfect credit score. She started checking her free scores on Credit.com when I introduced her to the tool, and she’s had a solidly high score for as long as she’s checked. Because her approach proved fruitful, I asked her to share her tips.
1. Pay Your Bill on Time & in Full
Most people understand you need to pay your credit card bill on time, because failing to do so results in late fees. Going more than 30 days past the due date without paying makes your account delinquent and hurts your credit score.
Carrying a balance doesn’t directly hurt your credit score, but if you want great credit, it can be a problematic habit. If you pay your statement balance every billing cycle, you’re more likely to keep your credit utilization low (that’s nearly as important as making payments on time), and you won’t pay interest on your purchases. Credit card debt can grow pretty quickly — here’s a primer on how APR works — and once you get into it, it can be very difficult to climb out.
She’s meticulous about paying any loan bills on time, not just credit cards. If you make one change to your financial behavior, make it timely payments, because payment history has the largest impact on your credit scores, and it helps you avoid costly fees.
2. Don’t Spend Money You Don’t Have
Committing to paying your credit card bill in full holds you accountable for the purchases you make. It can be easy to spend beyond your means when you’re not worried about covering the entire bill a few weeks later, but the “I’ll take care of it later” mindset only adds to what may eventually become a mountain of debt.
When I started using a credit card, I diligently maintained a check register of debits to my checking account, so I knew exactly how much money I had available to pay for whatever credit card purchases I made. I later realized most people don’t manage their credit cards that way, but it’s how my mom taught me to stay on track with credit card spending. Check registers have practically been replaced by online banking and budgeting tools, but as long as you stay on top of your transactions in some way, you shouldn’t have too much trouble avoiding debt.
3. Plan Your Purchase Timing
The third rule is very dependent on the first one: As long as you pay your balance in full every month, you can time your purchases so they don’t come due for 60 days. It’s very helpful when making a large purchase.
Here’s an example of what you would do: If you want to buy a $2,000 couch on your credit card and want to delay paying the bill as long as possible without paying interest on the purchase, you want to buy the furniture right after your billing cycle ends. Say the cycle ends on the 20th of the month, and then you receive a bill, due in 30 days, for the purchases between the 21st of the previous month and the 20th of the current month. On the 21st, you buy the couch. It won’t show up until you get your statement on the 20th of the following month, and you won’t have to pay for it until 30 days later.
The timing depends on your specific credit card agreement, but it’s not too difficult to figure out. Make sure you don’t make a mistake and end up owing more than you can afford to pay, though.
4. Check Your Credit
My mom didn’t start checking her credit scores until I showed her Credit.com’s free tools, but she always checks her credit reports to make sure there are no errors or negative items on her report. (Like credit card debt, I knew about checking my free annual credit report before I understood exactly what that meant.) She sets calendar reminders to check her free credit reports from Equifax, Experian and TransUnion through AnnualCreditReport.com.
My mom’s stellar credit (847 out of 850 the last time she checked) is largely a result of those practices. None of them are exceptionally clever or difficult to do — actually, they’re pretty boring and easy — so if you want to improve your credit, start checking your scores and give them a try. It’s important to note that credit standing isn’t reliant on credit card use alone, but it’s a great place to start if you’re trying to build credit.
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