How To Build Good Credit Habits

Your credit score is what determines whether you'll be able to rent or purchase a home, buy a car or get financing for a your latest big purchase. It's crucial that you develop good credit habits so that you won't be denied money when you need to borrow it most. Here are a few suggestions to help you build good credit habits.

Step 1

Buy only what you can afford. Good credit habits start with your credit card. But don't take this as permission to spend recklessly. Charge only the things to your credit card that you are able to pay for in full by the payment deadline. Your credit score will increase if you borrow on your credit card and then pay it off in full each month. This proves that you can afford all of your bills each month, and it's exactly the kind of good credit habits that lenders and creditors are looking for. It's also a good habit to get into for yourself, as it teaches you to restrict your spending to within reasonable limits (and keep you out of debt).

Step 2

Don't max out your credit cards. Just because you've got a $50,000 credit limit on your credit card doesn't mean that you're rich. When you're building your credit habits with credit cards, you've got to remember that money available on your credit card is not your money! You're borrowing it, and each dollar that you borrow will cost you more in the end if you can't repay it within a month. You know that you can't afford to pay off a maxed out credit card before a payment deadline each month, so why do it? With such high interest rates, carrying a balance on your credit card is not a good habit. It's an expensive one. Develop good credit habits by ignoring your credit limits and spending only what you can afford to pay off each month. (You can actually call and ask to have your credit limit lowered so that you're not tempted to spend more than you can afford each month.)

Step 3

Have one credit card. Now, we've all heard the argument that ‘that this credit card offers points, and this one offers cash back, and you need this one for this specific store'. But having so many credit cards will not help you build good credit habits. It will only tempt you to spend money that isn't yours. Choose one credit card to keep, opting for the one with the lowest interest rate and the best rewards (if any). Build good credit habits by not relying on credit to get you by each month. Get into the habit of paying with cash and restricting yourself to one credit card for emergencies. You should know by now that if you can't afford it, you shouldn't buy it. Realistically, one credit card is probably all you can afford to pay off completely each month. Don't tempt yourself with any more credit cards than that.  Learn to pay your bills in full and on time, and you'll be well on your way to building good credit habits.


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