10 Habits of People with Good Credit
People with good credit know that maintaining your credit is important for meeting your financial goals. If you want to buy a home, start a business, or purchase any items using a loan other type of financing, you will need a good credit score.
Here are 10 habits of people with good credit:
1. They Don’t Over Spend
Keeping a budget in mind is a priority for people with good credit. They know that spending more than they have in their account or borrowing more credit than they can pay back, is a recipe for a major hit to your credit score.
Credit cards are a type of revolving credit that allows you to borrow against a set credit limit. People with good credit keep the balance of their credit cards under 30% of the credit limit for any type of revolving credit. This is a practice that will positively impact your credit, and build a good credit score.
Help keep an eye on your budget by using our “Monthly Budget Analysis Worksheet”. Learn more about the advantages of knowing what you spend in this article.
2. Pay ALL Bills on Time
It is a guarantee that your credit score will drop when your credit history shows late or missing payments. People with good credit make sure that they have enough flexibility in their budget to pay all of their bills each month.
Utility companies, credit cards, insurance companies, vehicle loans, rental property, internet and mobile phone services, and other monthly billed debts all report your payment history to the credit bureaus. Having a history of consistently paying bills on time, builds your credit score.
3. Use Different Types of Credit
There are different types of credit, and people with good credit scores often have different types of credit that they have used over time. If your credit history reflects that you have responsibly used different types of credit, then your score will be higher.
These are 4 of the most common credit types:
- Revolving Credit – A line of credit that has a limited amount you can borrow against with individual transactions. Credits cards, store credit, and a home equity line of credit are all types of revolving credit.
- Charge Cards – A charge card is a pre-loaded card account that is used to build a credit history, often for people looking to boost their credit score. You are using your own money to build a transaction history that is reported directly to the credit bureaus.
- Installment Payments – Loans that are repaid in monthly installments. Mortgages, student loans, and vehicle loans are examples of installment credit.
- Service Payments – Monthly payments for services that are reported to credit bureaus. Utility bills, internet service, rent, and phone bills are all types of service credit.
4. Don’t Close Old Accounts
People who have good credit know that time is a factor in maintaining a good credit score. You can keep a store card or credit card account open, even if you don’t use it as much as you once did.
5. Take Care of Rented Property
A rented apartment or leased vehicle can impact your credit if it is returned with damages or in poor condition. People with good credit scores take good care of borrowed property.
6. Are Careful Drivers
Much like taking care of rented property, people with good credit make a habit of being a safe driver. Collisions and major accidents can put a strain on your finances and increase the cost of your car insurance.
7. They Save for a “Rainy Day”
Saving for a rainy day can protect your credit score, in the event of unexpected expenses. Learn how “Saving for a Rainy Day” can help build your financial stability in one of your previous articles.
8. Limit the number of credit inquiries at certain times
Making numerous credit inquiries in a short amount of time can lower your credit score. When you are looking for financing for a business loan, buying a home, or making another large investment your credit score is crucial.
When you are applying for a mortgage, you should avoid making additional credit inquiries. Even though it can be tempting to buy furniture or appliances as new home owner, you should wait until after closing your mortgage to use credit for large purchases.
9. They are cautious when co-signing
Co-signing for another person is extending your credit to that person. If the person you extended your credit to misses a payment, damages the property, or defaults on a loan…your credit will be impacted.
People with good credit are very cautious when it comes to co-signing.
10. Keep their Credit Score in mind
One of the most important habits of people with good credit, is that they keep their credit in mind. Daily transactions, monthly payments, and other financial decisions are what builds your credit score.
When you are looking to buy a home or make a different type of big financial investment, your credit score becomes very important. People with good credit have a history of being mindful of their financial health.
We are here to help you when you are ready to buy a home or refinance your current mortgage. Reach out to one of our licensed mortgage consultants with your questions and goals for your mortgage at www.texaslending.com.
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