Your credit score is one of the most important numbers in your financial life. It influences the interest rates you qualify for, your ability to secure loans and even some rental and employment decisions. The good news is that managing your credit does not require a secret formula. This article breaks down the most impactful habits you can build right now to protect and improve your score over time.
Maintaining and building your credit score can feel like a moving target, but there are clear guidelines you can follow that make a real difference.
The Big Three
Pay Your Bills on Time
This is the single most important factor in building and maintaining your credit score. Late or missed payments can significantly damage your score and your ability to secure new credit. The most reliable way to stay on track is to set up automatic payments or calendar reminders for every due date.
Use Less Than 30% of Your Available Credit
Credit scoring models look at how close you are to your credit limits, a factor known as credit utilization. Keeping your balances below 30% of your available credit is the general benchmark, but lower is always better. The best practice is to use your credit cards consistently and pay the full balance each month.
Only Apply for Credit and Loans You Actually Need
Every time you apply for a credit card or loan, the lender runs a hard inquiry on your credit report, which causes a small, temporary dip in your score. More importantly, multiple hard inquiries in a short period can signal financial stress to scoring models and compound the negative effect. Apply selectively and intentionally.
Other Tips and Tricks
Do Not Ignore Utility Bills or Service Agreements
Utility bills and service agreements do not accrue interest the way credit cards do, but unpaid balances can still be reported to credit bureaus or sent to collections, both of which can seriously damage your credit. Treat them with the same discipline as any other financial obligation.
Create a Financial Budget
Budgeting and credit management go hand in hand. A realistic monthly budget helps you understand exactly what you can afford to charge each month and ensures you are never caught short when the bill comes due. For guidance on building a budget, check out our How to Establish a Budget article.
Monitor Your Credit Score and Activity
Staying on top of your credit is easier than ever. Firefighters First Credit Union provides members with access to their free FICO Score through online and mobile banking. For more frequent monitoring, apps like Credit Karma allow you to track your credit activity in real time, including:
- Credit score and score history
- Credit utilization
- Credit and loan accounts
- Hard inquiries
- Average age of credit
- And more
Monitoring your credit not only keeps you informed but also helps you catch suspicious activity early. You can also pull a free, detailed credit report from all three major bureaus at any time at AnnualCreditReport.com. Access is free and available weekly.
Building Credit from Scratch
If you are new to credit or working to rebuild, the right product can make a significant difference. Firefighters First Credit Union offers a Visa Classic Secured credit card designed to help members establish and build credit, as well as shared secured loans that serve the same purpose.
