By Sequin HQ
There are plenty of credit card blogs out there — consider this your single source of (simple) truth. Here are the top 10 actions you need to take to keep building better credit, curated by the credit experts at Sequin.
Before diving into our credit tips, check out our credit myth busters quiz to test your credit knowledge!
- Get credit visible: have a credit card in your own name. Many women find out that they are “credit invisible” — meaning they do not have a credit history or credit score — when they go to take out a loan or mortgage for the first time. In fact, a 2010 Federal Reserve report indicated that married women were twice as likely as married men to have authorized user accounts make up the bulk of their credit history. If you’re an authorized user on your parent or partner’s card, they are building credit and you are not. To get started on building your credit for the first time, a good option is to start with a secured card, and then transition to an issued line of credit after that.
- Build your knowledge about how credit works. The top three factors that determine your credit score are repayment history (which accounts for 35% of your credit score), credit utilization (30%), and the length of your credit (15%). If you’re not sure how each of these work, check out our infographic.
- Pay on time & pay off debt. Women are 5% more likely than men to carry a balance, 4% more likely make only the minimum payment, and 6% more likely to be charged a late fee. However, this gap tends to narrow when women have information about how this affects them. In paying off debt, always pay off your highest interest credit card bills first, as soon as you can.
- Consider paying your credit card balance off multiple times per month to keep utilization as low as possible. That means if you purchase a huge item on credit that utilizes more than 30% of your credit line in the middle of your pay period, it might benefit you to pay it off right away.
- Don’t carry a balance (if possible). The interest that you will pay the credit card company when you carry a balance makes this the most expensive money that you will ever borrow. Do not buy into the myth that carrying a balance is good for you — if you are carrying a balance, you are paying extra interest every day that it is borrowed over the payment due date. Credit reporting bureaus look at whether you pay the full balance (as opposed to the minimum payment) on your statement on time every month. Take a look at your last three credit card statements (if you already have a credit card). Did you pay the balance in full every month? Were you charged any fees?
- Keep your oldest credit card active. Credit bureaus look at the age of your longest active credit card, and the older it is, the better for your credit score. Go through your wallet and take out your oldest credit card. Do you still use it? If not, it’s possible that the card issuer has deactivated your card. Check that it is still active. If it is, we recommend using it for one transaction every six months to keep it active (and paying it off, of course!). Another route is to put a recurring expense (such as a Netflix or Spotify subscription) on that card and set it to autopay so that it remains active and in good standing.
- Use autopay to set it and forget it. The best way to make sure you never miss a payment is to set your credit card on autopay to pay the balance in full on the due date. That’s one less thing that you need to worry about so that you can focus on the things that matter to you.
- Check your credit report often and address errors with credit bureaus. Studies show that women pull their credit reports less often than men. You can check your credit for free three times a year — once each with Experian, Equifax, and Transunion. If you see any fraudulent errors, contact your bank right away.
- If you make a mistake, call the bank and ask for forgiveness. If you accidentally miss a payment, call the bank and tell them. Nine times out of ten, if you have a track record of paying on time and it was truly an accident, they will understand and waive the late fee.
- Start thinking about building credit well in advance of when you will need it.When you apply for any loan (credit card, student loan, mortgage), one of the first steps a lender will take is to check your credit score. If you have a low credit score or are credit invisible (meaning there is no record of credit attached to your name), it will either be more expensive for you to borrow, and interest on the same credit card may cost you more than it would for others. Remember: Build credit early, responsibly, and consistently.
Disclaimer: A friendly and earnest reminder that content in the Sequin Project is not intended to be financial advice, and that the writers at Sequin are not certified financial advisors. If you’re looking to make any decisions related to the content above, please contact a certified financial advisor first.