How to Be Smart About Credit to Achieve Life's Milestones
For most people, life is not linear. It’s a journey marked with accomplishments and lessons, ups and downs. Depending on your goals, your finances can play a major role in your journey and your credit is one of the key financial metrics that can impact your financial abilities and decision making.
Chase recently announced the results of its 2021 Slate Credit Survey, a study that uncovers post-pandemic attitudes and behaviors around finances, redefining the “new credit normal”. Among the findings was the discovery that consumers are actively trying to improve their credit. Understandably, in our society, credit is essential when it comes to making purchases, especially big-ticket items such as a home or car. As an entrepreneur and new homeowner, myself, credit has played an integral role in achieving my life milestones.
Your financial history is measured and weighed, which allows the credit bureaus to give you a score, known as your credit score and this is a reason it’s important to understand how credit works. How you use credit is important and credit cards can be a valuable tool in boosting your credit score when used correctly.
Here are some tips to help you improve your credit score with a credit card:
- Understand the factors that go into calculating your credit score. While the scoring models and algorithms can change, your payment history, your utilization, and the length of your credit history are all important factors that impact your credit score. Also keep in mind your credit mix, meaning the types of credit you have in your portfolio and the amount of credit inquiries you have received.
- Make more than the minimum payment every month. Paying off your balance each month is not only a good practice for reducing your debt burden, but it also helps keep your utilization in check. Paying the minimum payment can be costly to your wallet and score, especially if you’re paying a high interest rate. If you can’t pay off the entire balance consider making more than just the minimum payment, that way you’re not just paying interest but also the principle.
- Keep your balance low. As mentioned above, your utilization is one of many factors taken into consideration when calculating your credit score. Aim for a utilization ratio of 30% or less on your card. The lower your utilization the more likely it is that the account will have a positive impact on your credit score.
- Make payments on time. Late payments can negatively impact your credit score. A payment that's more than 30 days past due can knock as many as 100 points off your credit score. Look for a credit card that considers you for an automatic APR reduction or a credit line increase.
- Check your credit score. It is very difficult to change what you don’t track and measure. There are a variety of free tools available for you to check your credit score so that you can begin making necessary changes and adjustments before your next major financial decision. For example, opens in a new windowChase Credit Journey is free to use (you don’t even have to be a Chase customer to enroll) and can help you:
- See your latest credit score for free anytime, without affecting your credit.
- Get notified if your data is breached or exposed on the dark web.
- Receive critical alerts to help protect your credit and identity.
- Explore personalized resources to help you build and maintain your credit.
Reaching your financial goals takes time, effort, and careful planning but it is possible. When it comes to knowing one’s credit score, younger generations seem to have a more significant challenge with 4% of Gen Z and Millennial respondents saying it's a major challenge compared to 21% of Gen X and Baby Boomer respondents. Although I am a financial educator today, I haven’t always had it together and my own path towards financial security is always evolving each time I reach a new level.
We’re all on a journey of some sort but by taking simple steps today your money goals can be well within reach.
