credit score
Adulting 101

3 Step To Achieving & Maintaining A Good Credit Score

Having credit and keeping up with it is most likely one of the scariest things in the world. You can miss one payment and all of a sudden your credit score drops. There are many people who struggle with achieving a good score. While others, are completely confused on what credit is and what to do with it. If you’re one of these people then this article is for you. In this article, we will discuss what credit actually is, the different types, my credit journey, and 3 steps to achieve and maintain a good score. I know this is a lot of information to take in and most things won’t make sense, but I will try my very best to simplify everything.

Disclaimer: I am in no way shape or form a credit expert, the steps I outline below are simply what has worked for me and many others. Most credit information outlined can be found on thebalance.com and experian.com (where I go to learn about credit).

Note: Before we get into the steps, I suggest you make a Credit Karma account. in order to view your score and download the app for your credit card provider.

What is credit?

When you search up the definition of credit on Google it says, “the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.” And that is exactly what it is. Credit is money that you borrow and have to eventually pay back.

There are 4 different types of credit: revolving credit (you have a max credit limit on a card), charge cards (you pay the same amount every month), service credit (your phone bill, gym membership, any sort of monthly bill), and installment credit (car loans or mortgages). In this post, we will be focusing on revolving credit which is what most credit cards are.

What do we use credit for?

Okay so now that we know what credit is and what the different types are, let’s talk about why we need a good credit score and why it’s used. With a good credit score, it’ll be easier for you to get approved for loans where ever you go. Let’s say you want to build a house or business from scratch but don’t have any money. Your steps would be to go to the bank and ask for a loan. With good credit, the bank will most likely approve that loan and give you a large sum of money.

Another good use for credit is when you’re renting a home or apartment. Most landlords will do a credit check to make sure that you’re able to pay your bills on time. Good credit also gives you the benefit of having a better car insurance rate. The better your credit is the less you will pay in car insurance.

Overall, credit is mostly about responsibility. The more responsible you are with your credit, the less you pay and the more people give you.

My Credit Journey

I began building my credit the summer before college. But, in order to tell you how, I need to take you back. If you’ve read my About Me page then you know that adulting is my thing. I love learning about credit and budgets and businesses. I can literally spend a whole day creating budgets and business plans. Its who I’ve always been. Now, seeing as how I’m obsessed with being an adult, I’ve spent most of my high school years researching about credit. And just like everyone else, I. Was. SCARED.

Another thing you will learn about me is that I have a lot of hopes and dreams. And with these hopes and dreams comes money that I need to spend. One of my biggest goals in life is having my dream car and a home. This is why I began to research credit. When I tell you I was scared of credit cards, I was completely frightened. I told my parents that I never wanted a credit card because it was too much of a hassle. However, my parents made me get one anyway because as a college student, they are the easiest way to build credit.

I got my first credit card in July 2018. I decided to get the lowest amount ($500) and work my way up. This was the best route because I knew that there was no reason for me to have more than $500. My goal, however, was to have it gradually increase over time. How did I plan on doing this? By following the steps below.

Steps to achieve & maintain a good credit score:

1. Always pay 3 or 4 days before the deadline

Paying off your card on time is CRUCIAL! However, you have to know exactly when to pay. When you get a credit card, the bank will ask you when you would like to have your payments due by. I chose mine at the end of the month because in my head it gave me more time to pay (tbh I just find odd numbers to be unlucky and didn’t want to pay on an odd date). Therefore my payment dates are on the 28th of each month. I feel that by making my payments for the end of the month gives me the opportunity to really plan out what I need to buy and how I’m going to pay it back. As I said, adulting is my thing which means I plan out mostly everything to the tea.

Since I pay at the end of the month, I found that it’s best to pay 3 or 4 days before my payment is due. This doesn’t mean I can’t pay beforehand, however, it’s not wise to pay too early either. If you pay your bill too early (between day 1-4 of the month), your payment will most likely not go through for that month and would be used for the previous month. I learned this while speaking to my bank about my payments. They told me to never pay before the 4th of the month and always give myself at least 2 days before the due date to pay because it takes 24 hours for the payment to go through. (Seriously, always ask questions, no matter how irrelevant or dumb, ALWAYS ask). NEVER pay your bill the day of, you don’t want to risk forgetting. Remember, if you miss a payment, your credit score will go down.

2. Never pay the minimum amount

NEVER EVER EVER pay the minimum amount on your card. If you owe $300 PAY THOSE $300. Paying the minimum amount is how companies trap you and doing so will not benefit your credit AT ALL. If the minimum amount is $35 but you owe $789 and have a limit of $800, how will you have money for next month? Its the same thing as getting a car. When you’re buying a car, dealerships will trick you into leasing instead of buying because it benefits them not you. They will tell you that you can pay the minimum of the car each month to help you out. WRONG! Do not fall for this trap because it will RUIN your credit. Paying the minimum amount will only increase your interest and leave you with less money in your pocket than when you began.

Remember that life is a business and if you want to win, you have to play the game better than the creators.

Paying the full amount that’s due will show creditors that you are responsible with your money and payments. Remember, credit is all about responsibility. If you don’t pay, it’s a problem. If you pay the minimum amount, your score will not benefit. Therefore, just pay the full amount.

3. Only use 30% of your limit

This part is also crucial because you don’t want to overuse your credit card. If your goal is to have your credit limit increase throughout time, this is how you do it. Since my limit was $500 I only spent 30% of that which is $150. Although this number may seem low for my limit, it was smart because I was able to pay it off easily, increase my credit score tremendously, and I never went past my limit (RESPONSIBILITY). The one time I used my credit card too much (spent $400), my credit score dropped by 45 points. Then, I only paid the minimum of $35 and my credit dropped another 11 points. See what I mean?

How am I doing today credit wise?

Because of the fact that I learned from my mistakes and was responsible with my payments and limit, my maximum limit increased from $500 to $1700. That’s $1,200 more than what I started with. And guess in how much time I did that. Go ahead, just guess….. In the span of 5 months. That is beyond crazy. Not only did my credit limit increase, but, my credit score did as well.

If you’ve read this far, first of all, thank you!! You are a trooper. I hope that these steps help you in your credit journey as much as it has helped me. Credit is not about how rich you are but rather how you manage your money. Even though I am not a credit expert, I can definitely say that following these steps and having a set credit goal has taken me such a long way. If you try these out, definitely let me know how it impacted you, I would love to hear all about your journey.

Until next time,

Stay vibrant and embrace the gray!

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