April is Financial Literacy Month in the US, but it is always a good idea to maintain best practices on your credit.
We review those 5 Tips to Improve Your Credit Health.
1. Understand Your Credit Card Options
“If you have good or excellent credit, you’ll qualify for 0 percent introductory interest offers and cards with the best rewards. If you have fair credit, you’ll likely qualify for cards with lower rewards rates and fewer perks. And if you have bad or no credit, you might qualify only for secured cards – which are backed by a cash deposit – or need a co-signer to get credit.”
2. Know the Impact of Getting New Cards and Closing Old Cards
“Opening a credit card account triggers a new credit penalty on your score. The longer your credit history, the smaller the impact, but you’ll likely lose at least a few points. That’s why we recommend spacing out card applications by at least six months.”
Closing credit cards will negatively impact your credit utilization. Paid off credit cards are great because the increase your available credit and reduce your overall credit usage.
3. Reduce Your Balances Faster
Paying off your debt sounds like a no-brainer, but it can be difficult for many people. The only way you are going to pay down a credit card is by paying more than the minimum monthly payment. Significantly more. If you are serious about paying down your debt, forgo the daily latte and those wild weekends. An extra $10 a weekday and $100 dollars a weekend quickly turns into an additional $150 a week x 4 weeks = $600 extra dollars to help paydown that card.
4. Learn How APR Works
“If you do carry a balance, it’s important to understand how APR works. You accrue interest on your average daily balance, not the balance the day after the payment is due. If you know you’re going to carry a balance, make multiple payments throughout the month. This will reduce your average daily balance, and therefore, the interest you’ll accrue.”
This is a pivotal point which you should be aware of. Your due date is NOT the day you should make your payment. You should be making your payments a week early to make sure you are not getting high balances and increasing the amount of interest you have to pay. Most people cannot pay multiple times a month (although it may serve you well), but you can definitely program yourself to make your payments a week early.
5. Practice Patience
“Improving credit can take a while – but over time your credit history lengthens and old, negative marks have less impact on your score.
If you’ve started doing all the right things for your credit health, sit back and let time do its thing. Once you’ve built a good credit foundation, you’ll enjoy the rewards for years to come.”