Your credit report and credit score are just one financial marker that paints a picture of your financial standing. However, the report determines whether you can access credit, loans, homes or cars — and on what terms.
The lower your score, the more you’ll pay. Whether you have bad credit, good credit or somewhere in between, you’ll need to nail these five credit habits to get or keep your credit score healthy and reap the benefits of a good credit score.
Your payment history makes up the biggest chunk of calculating your credit score, accounting for 35% of your total FICO score and 41% of your VantageScore. That means late payments can cause major drops in your score.
It’s easier said than done, but it’s worth setting up automatic payments when you can and building a budget to meet your payment deadlines across the board. The longer you pay your bills on time, even if you have a late payment or two, the better your chances for your score to increase.
Applying for new credit could mean positives and negatives for your credit. So, let’s break them down:
The positives:
The negatives:
Student loan repayments resumed in October 2023, which has put many borrowers in a financial crunch. Work with your loan servicer to set up a repayment plan that matches your budget and allows you to make on-time payments. Skipping payments means taking on a huge risk — not only is interest still accruing, making the amount you owe larger with each month, but a missed payment can do huge damage to your credit.
The Biden administration put a 12-month on-ramp period in place to help borrowers protect their credit as they get back in the swing of repayments. This allows you to discuss a repayment plan with your student loan servicer before your credit is on the line.
Set up and contribute to an emergency fund monthly. Even just a little each month adds up. This can help ensure you have enough money to continue paying your regular bills and creditors on time, even when unexpected circumstances arise. It also means you won’t have to jump to taking out a credit card or loan to pay for the unforeseen.
Staying on top of your credit score and what appears on your credit report helps you determine your creditworthiness and allows you to spot any incorrect or fraudulent activity on your accounts. This way, you can keep track of your credit health and pivot as needed. You can get a free credit report weekly through AnnualCreditReport.com.
Your credit score doesn’t have to be an overwhelming topic. As with any part of life, putting in place good habits can push your circumstances in the right direction. Your credit is no different. Setting a few credit management guidelines can mean reaping the benefits of good credit and saving you money in the long run.
Megan B. Shepherd is a personal finance editor at Finder committed to helping Americans navigate the financial world of loans and insurance. Megan’s expertise has graced the pages of Forbes, Fox, Time, Reviews.com, and carinsurance.com, adding invaluable information related to loans and insurance. Megan’s adept knowledge of financial topics has also led to contributions to reputable publications like Nasdaq and MediaFeed, where she intricately dissects and explains personal loans, financial strategies and smart borrowing tactics.
This article originally appeared on Finder.com and was syndicated by MediaFeed.org.
Top alternatives to Kikoff for easy credit-building include Self, Cleo, Grow Credit, Fizz and One Finance.
The Tomo credit building card is currently on a waitlist, meaning it’s not available right now. Compare features and other options here.
Kovo Credit Builder helps you build your credit history for around $10 per month and reports to four credit bureaus. Many competitors do not.
The best credit-building apps include Self Credit Builder, Step, Fizz, Cred.ai, Cleo, Grow Credit and Credit Karma Credit Builder.
Lexington Law is a credit repair company, but it carries a poor reputation.
Credit Strong is a division of Austin Capital Bank and offers many credit-building loans to choose from, but they can be costly.
Kikoff offers several credit-building products, including a secured card with no monthly fee, no interest charges and a low minimum deposit.
Prepaid credit cards are secured cards that work like debit cards to avoid APR and build credit. Top options include Step, Current, Varo and more.
Bright can help pay down credit card debt from multiple angles.
Cushion is an all-in-one banking app that helps you track your spending and build credit without interest charges. See if it could be right for you.